World Trade Organization (WTO) – UGC NET Commerce Notes

The World Trade Organization (WTO), established on January 1, 1995, is an international body that regulates global trade and replaced the General Agreement on Tariffs and Trade (GATT). Headquartered in Geneva, Switzerland, it aims to ensure smooth, predictable, and free trade through principles like non-discrimination, transparency, and free trade promotion. With 166 member nations, the WTO formulates trade agreements, resolves disputes, and supports developing countries through special provisions. Key agreements like GATT, GATS, and TRIPS impact global trade significantly, making WTO an essential topic for understanding international trade policies in UGC NET Commerce.

Key Principles of World Trade Organization

1. Most-Favored-Nation (MFN) Treatment

• Article I of the GATT mandates equal trade benefits for all WTO members. For example, if a country lowers tariffs for one member, the same must apply to all.
• MFN is a cornerstone of WTO, covering 98% of global trade.

2. National Treatment

• Article III of the GATT ensures imported goods are treated equally to domestic goods after they enter a market.
• For example, India cannot impose additional taxes on imported electronics compared to locally manufactured ones.

3. Free Trade Promotion

• Average global tariffs have reduced significantly under WTO, from 40% in 1947 (GATT era) to under 10% in 2021.
• The WTO facilitates trade negotiations to reduce barriers like tariffs, quotas, and subsidies.

4. Predictability and Transparency

• WTO members must publish their trade policies and adhere to binding commitments made during trade negotiations.
• Over 36,000 tariff commitments have been recorded to ensure transparency.

5. Encouragement of Fair Competition

• Anti-dumping rules and subsidy regulations under the WTO discourage unfair trade practices.
• Example: WTO has resolved over 600 trade disputes since its inception, ensuring fair practices.

6. Special Provisions for Developing Countries

• About two-thirds of WTO members are developing or least-developed countries (LDCs), benefiting from Special and Differential Treatment (S&D).
• Provisions include longer time frames for implementing agreements and exemptions from specific obligations.

Structure of World Trade Organization (WTO)

1. Ministerial Conference

• Highest decision-making body of the WTO, comprising representatives (trade ministers) from all member countries.
• Meets at least once every two years to set overarching trade policies and make major decisions.
• Example: The 12th Ministerial Conference (MC12) was held in June 2022 in Geneva.

2. General Council

• Operates as the main decision-making body between ministerial meetings.
• Composed of ambassadors or delegates from member countries, meeting regularly in Geneva.
• Functions through two sub-branches:
  • Dispute Settlement Body (DSB): Oversees trade dispute resolution under the WTO’s rules.
  • Trade Policy Review Body (TPRB): Monitors and evaluates trade policies of member countries to ensure transparency.

3. Councils for Trade

• These specialized councils work under the General Council, focusing on specific trade areas:
  • Council for Trade in Goods: Administers agreements like GATT and others related to goods trade.
  • Council for Trade in Services: Supervises the implementation of GATS.
  • Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS): Manages intellectual property trade issues.

4. Secretariat

• Located in Geneva, Switzerland, the Secretariat provides technical and professional support to WTO’s operations.
• It is led by the Director-General, currently Ngozi Okonjo-Iweala (2024).
• The Secretariat employs over 600 staff members from member countries but has no decision-making power.

UGC NET Commerce Exam Preparation

Agreements under World Trade Organization (WTO)

The World Trade Organization (WTO) has various agreements:

1. General Agreement on Tariffs and Trade (GATT)

• Established in 1947 and later incorporated into the WTO framework in 1995.
• Focuses on reducing tariffs and trade barriers to encourage global trade.
• Key Principles: Non-discrimination, reciprocity, and binding dispute resolution.
• Covers trade in goods, with 164 member countries adhering to its provisions.
• Tariff Reduction: Average global tariffs have dropped from 40% in 1947 to under 10% in recent years.

2. General Agreement on Trade in Services (GATS)

• Established in 1995 as part of the WTO to regulate international trade in services.
• Covers four modes of services trade: Cross-border trade, consumption abroad, commercial presence, and presence of natural persons.
• Key sectors covered: Financial services, telecommunications, tourism, and transport.
• Negotiations under GATS aim to enhance access to services markets, particularly for developing countries.

3. Trade-Related Aspects of Intellectual Property Rights (TRIPS)

• It was implemented in 1995
• TRIPS sets minimum standards for intellectual property (IP) protection, including patents, copyrights, trademarks, and geographical indications.
• Notable example: TRIPS has been central in the COVID-19 vaccine debate, especially regarding patent waivers for vaccines.

4. Trade Facilitation Agreement (TFA)

• Adopted in 2013 at the Bali Ministerial Conference and entered into force in 2021.
• Aims to simplify and harmonize international trade procedures (e.g., customs procedures, border security) to reduce costs and facilitate smoother cross-border trade.
• Impact: Expected to cut global trade costs by up to 14% and increase exports from developing countries by $1 trillion annually.

5. Other Agreements

• Agreement on Agriculture (AoA): Focuses on reducing agricultural subsidies, tariffs, and trade barriers while addressing food security and rural development concerns.
• Agreement on Textiles and Clothing (ATC): Implemented in 1995 to phase out quotas on textiles and apparel trade by 2005.
• Agreement on Subsidies and Countervailing Measures (SCM): Regulates the use of government subsidies that may distort international trade by providing unfair advantages to domestic producers.

WTO and Developing Countries

The WTO offers significant benefits to developing countries, including enhanced market access and technical support. Let’s explore more:

1. Benefits to Developing Countries

• Market Access: Developing countries gain access to global markets by benefiting from tariff reductions and trade liberalization under WTO agreements.
• Trade Preferences: They can export goods and services with reduced tariffs in developed countries, promoting economic growth.
• Technical Assistance: The WTO provides capacity-building programs, technical assistance, and training for developing countries to help them implement WTO rules effectively.
• Dispute Settlement: Access to the Dispute Settlement Mechanism (DSM) ensures developing countries can resolve trade conflicts and challenge unfair trade practices.

2. Special and Differential Treatment (S&D) Provisions

S&D provisions offer developing countries flexibility in implementing WTO agreements by providing longer time frames, reduced obligations, and additional support.

Key Features

• Longer Implementation Periods: Developing countries are granted extended timelines to comply with agreements.
• Exemptions from Specific Obligations: For instance, developing countries may be exempt from certain tariff reductions or obligations under trade agreements.
• Technical Assistance and Capacity-Building: The WTO offers financial and technical support to help these countries build the necessary infrastructure for trade.
• Example: Under the Agreement on Agriculture (AoA), developing countries were allowed to maintain higher levels of subsidies for agricultural products than developed countries.

World Trade Organization (WTO) and India

1. India’s Role in WTO Negotiations

• Active Participation: India is a founding member of the WTO and plays a significant role in shaping global trade policies, particularly for developing countries.
• Leadership in Agriculture: India has been a vocal advocate for reforms in global agricultural trade, particularly on issues like agricultural subsidies and market access for agricultural products.
• Defender of Developing Countries: India champions the interests of developing nations in WTO negotiations, pushing for Special and Differential Treatment (S&D) and fair trade practices.

2. Impact of WTO Agreements on Indian Economy

• Market Access: India’s participation in WTO has enhanced its access to global markets for goods, services, and intellectual property.
• Economic Growth: By liberalizing trade, India has experienced growth in export sectors, especially in textiles, software, and pharmaceuticals.
• Increased FDI: India’s involvement in the WTO has attracted more foreign direct investment (FDI) due to its commitment to fair trade practices and reduced trade barriers.

3. Key Issues for India in WTO

• Agricultural Subsidies:
  • India provides substantial subsidies for its agricultural sector, especially for food grains, which could conflict with WTO rules.
  • Challenge: Under WTO’s Agreement on Agriculture (AoA), India faces pressure to reduce agricultural subsidies, which could affect its food security programs.
  • India’s Stance: India has demanded special provisions for food security and subsidy programs, arguing that these are crucial for poverty reduction and domestic welfare.
  • Example: The public stockholding for food security issue is a key concern, with India seeking a permanent solution to protect its subsidies under WTO rules.
• Intellectual Property Rights (IPR):
  • India has faced challenges in complying with the TRIPS Agreement
  • Challenge: The WTO mandates stronger IPR laws, which can limit access to affordable generic medicines, crucial for India’s healthcare sector.
  • India’s Stance: India has used flexibilities under TRIPS to produce affordable generic drugs, especially for diseases like HIV/AIDS and cancer, and has advocated for TRIPS waiver for public health emergencies.
  • Example: India won a landmark patent case in 2013, where it denied a patent for a cancer drug on the grounds of it not meeting patentability criteria, promoting access to affordable medicine.
• Trade Facilitation:
  • TFA aims to simplify customs procedures, which could benefit India by reducing trade costs and improving export efficiency.
  • Challenge: India faces challenges in modernizing its customs infrastructure, especially in rural areas.
  • India’s Actions: India has committed to implementing the TFA gradually, with an emphasis on capacity-building and investment in infrastructure to comply with WTO standards.
  • Example: India has implemented a single window system at several ports to reduce delays in the export-import process, in line with WTO’s TFA objectives.

World Trade Organization (WTO) Conclusion

In conclusion, the World Trade Organization (WTO) plays a vital role in regulating global trade, promoting free trade, and ensuring fair competition. It helps developing countries through Special and Differential Treatment (S&D) provisions while addressing challenges like agricultural subsidies and intellectual property rights. Understanding WTO agreements is crucial for UGC NET Commerce aspirants to grasp the complexities of international trade and its impact on global economies.

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