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World Trade Organization (WTO)

World Trade Organization (WTO)

World Trade Organization (WTO)- The Urugvay round of GATT (1986-93) gave birth to WTO. The members of the GATT signed on an agreement of Urugvay round in April 1994 in Morocco for establishing a new organization named WTO. It was officially constituted on January 1, 1995 which took the place of GATT as an effective formal organization.

In short, WTO is a new globally recognized trade organization with the new name succeeding GATT on reviewed agreements and having a new vision and strong enforcement power to promote international trade.

Features of WTO

Following are the salient features of the WTO:

  1. It has replaced GATT.
  2. It is an International Trade Organization.
  3. It is based on multilateral trading system. The ultimate aim is to establish a rule based global system of free trade.
  4. Its statue is equal to IMF and IBRD.
  5. It includes trade in goods, trade in services, protection of intellectual property-rights, trade-related investment measures etc.
  6. Agreements agreed by member-countries are binding on all members of WTO and if any member does not follow such agreements, then its complaint can be lodged with the Dispute Settlement Body of WTO.
  7. It has wider scope than GATT. It covers GATT agreements and agreements on trade service, intellectual property rights and investment.
  8. Unlike International Monetary Fund (IMF) and the World Bank, it is not an agent of United Nations..
  9. Unlike IMF and World Bank, there is no weighted voting, rather all the WTO members have equal voting rights (One Country, One Vote). 10. The decision-making under this organization is carried out by consensus. Each member has one vote. 11. WTO has a large secretariat and huge organizational set-up.

Structure of the World Trade Organization (WTO)

  1. Ministerial Conference:

    It is the highest hierarchical level in the organizational structure, It is composed of representatives of all the member countries which meet at least once every two years. It is the policy and strategy-making body. The Ministerial conference takes decisions on all matters under any of the Multilateral Trade Agreements.

  2. General Council:

    It is the executive body of the WTO. The Ministerial Conference gets the polices and strategies implemented and executed through General Council. All the member countries of the WTO have their representative in the General Council. It also acts as the Dispute Settlement Body as well as the Trade Policy Review Body. 3. Functional Council under the General Council: There are three functional councils under the General Council which are as follow:

  1. Council for Trade in good-

    This council undertakes the functions of the Multilateral Trade Agreement (MTA) relating to trade in goods.

  2. Council for Trade in Services –

    This council undertakes the functions of (MTA) relating to trade in services.

  3. Council for Trade-related Aspects of Intellectual Property Rights (TRIPRs):

    This council undertakes the implementations and functions of all the agreements relating to this area.

  1. Committees and Management Bodies:

    There are three committees, viz., the Committee on Trade and Development (CTD), The Committee on Balance of Payment Restrictions (CBOPR), and the Committee on Budget, Finance and Administration (CBFA) which execute the functions assigned to them by the WTO Agreement and the GC.

Administration of WTO

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.

There are number of important committees for administration of WTO, out of which, 2 committees play the pivotal role in WTO. They are:

  1. Dispute Settlement Body – DSB
  2. Trade Policy Review Body – TPRB

DSB considers the complaints of member countries against violation of rules by any member country. This body appoints a group of experts to investigate into such complaints. The body meets twice a month for such cases.

TPRB reviews the trade policy of the member countries. The trade policies of all the big trade powers of World are reviewed after every 2 years. All the members of WTO are the member of TPRB.

The present strength of WTO membership is 164.

W.T.O. benefits to INDIA

India is one of the founder members of World Trade Organization. India has most of its foreign trade with those countries that are members to WTO. There has been lot of debate on the issue whether India would gain or lose by becoming member of WTO or by signing Dunkel Draft. Following arguments can be advanced in favours of India becoming a member of WTO.

According to the supporters of WTO, India is likely to derive a number of benefits from its membership of WTO. The expected main benefits are as follows:

  1. Benefits from Expansion in Trade:

    World Bank, OECD and GATT Secretariat have estimated that the income effects of the implementation of the Urugvay Round package will add between 213 and 274 billion U.S. dollars annually to world income. The GATT Secretariat further projects that the largest increases will be in the areas of clothing (60%), agriculture, forestry and fishery product (20%) and processed food and beverages (19%). India’s competitive advantage lies in these fields; Hence, it is logical to believe that India will obtain large gains in these sectors.

  2. Improved Prospects for Agricultural Exports:

    The second benefit that India can expects relates to the improved prospects for agricultural exports. There are two specific reasons. Firstly, with restrictions on the import of agricultural goods reduced in developed countries, India will be able to expand its exports of agricultural products in which it has tremendous comparative advantage, by venture of Good and very large variety of soils and cheap labour. Secondly, the agro-based industries will also be able to export much and earn more of foreign exchange as these are little/nil imports-intensive sectors.

  3. Benefits from Phasing Out of MFA:

    Many observers argue that in the new quota-free regime in textiles and clothing’s that is now in vogue (since January 1, 2005) India’s exports of textiles and clothing will increase considerably and Indian export of these products will flood’ the U.S. an d European markets.

  4. Benefits from Multilateral Rules and Disciplines:

    The Urugvay round agreement has strengthened multilateral rules and disciplines. The most important of these relate to anti-dumping, subsidies and countervailing measures, safeguards and disputes settlement. This will ensure greater security and predictability of international trade. This world also is favourable for India’s international business.

  5. Market Access:

    India along with other developing countries has now the market access to a number of advanced countries due to the imposition of the clause concerning to trade without discrimination.

  6. TRIPRS:

    The agreement of TRIPRs provides for 10 years transition period for introduction of product patent in drugs, chemicals and food products. Product patents would not affect majority of drugs and for the others the Government can undertake compulsory licensing for non-commercial public use as well as to prevent the situations like exorbitant prices of inadequate availability.

  7. Services:

    By including trade in service sector under WTO proposals, developing countries like India will stand to gain. According to WTO, developed countries will establish large number of trade and service establishments like banking, insurance, transport, hotel, etc. India will gain in skilled services export like computer software, consultancy, medical services, etc. The cross border migration of trained manpower is allowed under the agreement. It shall also help India in reducing unemployment in the country.

  8. Gains in Efficiency:

    An important aspect of benefits will be a large improvement in the efficiency of the economy.

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