1 January, 1995
Geneva, Switzerland
What is the WTO?
The World Trade Organization (WTO) is the only global
international organization dealing with the rules of
trade between nations
At its heart are the WTO agreements, negotiated and
signed by the bulk of the world’s trading nations and
ratified in their parliaments
The goal is to help producers of goods and services,
exporters, and importers conduct their business
Objective of a rule-based system
Creation of a multilateral organization aimed at evolving a
liberalized trade regime under a rule-base system
rule-based system designed to ensure that international
markets remain open and their access is not disrupted by
sudden and arbitrary imposition of import restrictions
trade rules: WTO agreements on goods, services, and
intellectual property negotiated by member nations
rule-based system: WTO as an international organization
that facilitates the implementation, administration, and
operation of the trade agreements
Multilateral trading regime: implications for firms
security of access to international markets
implication for importers of raw materials and
other inputs
Security of access to international markets
tariff reduction : 40 % to 4 %
tariff binding: bound against further increases
binding enables international firms to prepare investment
and production plans under conditions of certainty
bound tariff line: tariff rate on imports that are committed
by the country to the WTO and difficult to increase
Functions and structure of WTO
150 member countries accounting for 97 % of world trade
to facilitate the implementation, administration, and operation of
the trade agreements
to provide a forum for negotiations among member countries
responsible for the settlement of difference and disputes
among member countries
Multilateral trading system
The WTO agreements among member countries cover a
wide range of subjects related to international trade
Agriculture
Textiles and clothing
Banking
Telecommunications
Government purchases
Industrial purchases
Product safety
Food sanitation
Intellectual property
WTO agreements
cover two basic areas of international trade: goods and
services and intellectual property
reduction in industrial tariffs: increased access of
industrial goods and security for investors and firms
tariff: customs duties on merchandise imports levied on
either an ad valorem basis (percentage of value) or on a
specific basis (rate per unit of weight)
tariffs provide a price advantage to locally produced
goods and raise revenues for the government
Reduction in tariffs
the average of tariffs applicable to industrial
products are as follows:
- 3.8% in developed countries
- 12.3% in developing countries
- 6% in transition economies
increased the number of imports items with
bound tariff lines for developing countries
increased from 21% (pre-WTO) to 73%
Tariffs in India: Central Board of Excise and
Customs
([Link])
electrical machinery and equipment : electric motors
and generators, electric generating sets, and rotary
converters 12.5 rate of duty
Range: 5-12 % for industrial and non-industrial
imports
Agricultural goods
Range: 30%-100%
- Wheat: 100 %
- Rice: 80 %
- Tobacco: 30 %
Elimination of non-tariff measures
quotas and other NTBs replaced by tariffs that
provide equivalent levels of trade protection
textiles and agricultural products
Agreement on Agriculture reformed trade in
agriculture
developed countries cut tariffs and export subsidies
(lowers cost production, transportation, and
marketing) and by 36 % and developing countries by
24%
Trade in textiles
World trade in textiles: cotton, natural and man-made
fibres was restricted by import quotas for four decades
1974-1994 Multi-fibre Agreement: quota system put
restrictions on quantities traded
1995: WTO’s Agreement on Textiles and Clothing (ATC)
replace MFA
a landmark Agreement that eliminated quotas on textile
trade and replaced with import tariffs : 12.5 import duty
on textiles and yarn in India
Agreement on Sanitary and Phytosanitary Measures
based on the principle of that governments can
act against trading activity in order to protect
human, animal, and plant life
Set out basic rules on food safety and plant
health standards
includes provision for control (pest), inspection
(fumigation): fresh fruit, vegetables, live
animals, and plant specimens
The General Agreement on Trade in Services
GATS is the only set of multilateral rules governing
international trade in services
Services represent the fastest growing sector: account for
60% of global output, 30% of global employment, and 20 %
of global trade
the agreement covers all internationally traded services
banking, telecommunications, tourism, professional
services, financial services, air transport, movement of
natural persons
GATS
defines four modes of trading services internationally
services supplied from one country to another (cross-
border supply)
consumers or firms making use of a service in another
country (tourism)
commercial presence: a foreign company setting up
subsidiaries to provide services in another
presence of natural persons: individuals travelling from
their own country to supply services in another
(consultants)
Trade-related Aspects of Intellectual Property Rights (TRIPS)
protection and enforcement of intellectual
property rights
TRIPS introduced intellectual property rules in the
multilateral trading system for the first time
TRIPS narrowed the gaps in national laws among member
countries and extended IPR protection under common
international rules
Patents, trademarks, copyright, industrial designs, layout
designs, integrated circuits