INSTITUTE: USB
DEPARTMENT: BBA
Bachelor of Business Administration
Business Environment BAT-306
UNIT 2 : Chapter 2.1
WTO
DISCOVER . LEARN .
EMPOWER
WTO
Course Outcome Will be covered in
CO Title Level
this lecture
Numb
er
CO1 It will help the students to Remem
understand and analyze various ber
environmental factors and their
impact on business
CO2 It will help the students to Unders
understand the Economic tand
Environment and different
Economic Systems
CO3 Students comprehend the impact Underst
of the global factors on the and
environment.
2
World Trade
Organisation
WTO
INTRODUCTION OF WTO &
I
INDIA
• WTO was formed on 1st Jan,1995.
• It took over GATT (General agreement on tariffs &
trade). In 8th round of GATT, popularly known as
Uruguay Round, member nations of GATT decided
to set up a new organization, ‘World Trade
Organization’ in place of GATT.
•A Forum where member countries met from time to
time to discuss & solve world trade problems .
•It Enjoys identical legal status , privileges ,
Immunities that the world bank & IMF get .
WORLD TRADE ORGANIZATION
• The WTO was born out of the General Agreement on Tariffs and
Trade (GATT).
• Headquarters : Geneva, Switzerland
• Formation : 1 January 1995
• Membership : 153 member countries
• Budget : 163 million USD (Approx).
WTO Vs GATT
• It wasGATT
ad hoc & provisional. WTO
• It is permanent.
• It had no provision for • It has legal basis because member
creating an organization. nations have verified the WTO
agreements.
• It allowed contradictions in • More authority than GATT.
local law & GATT
agreements. • It doesn't allow any contradictions
in local law .
OBJECTIVES OF WTO
The primary aim of WTO is to implement the new world
trade agreement.
To promote multilateral trade .
To promote free trade by abolishing tariff & non-tariff
barriers.
To enhance competitiveness among all trading partners so
as to benefit consumers.
To increase the level of production & productivity with a
view to increase the level of employment in the world.
To expand & utilize world resources in the most optimum
manner.
To improve the level of living for the global population &
speed up economic development of the member nations.
To take special steps for the development of poorest
nations.
• India is one of the founder members of WTO.
• WTO is an international trade organization having set
of rules & principles, mutually designed & agreed upon
to promote international trade in general & reduction
of tariffs barriers & removal of import restrictions in
particular.
Functions OF WTO
Implementing WTO agreements & administering the
international trade.
Cooperating with IMF & World Bank & its associates for
establishing coordination in Global Trade Policy-Making.
Settling trade related disputes among member nations with
the help of its Dispute Settlement
Reviewing trade related economic policies of member
countries with help of its Trade Policy Review Body (TPRB).
Providing technical assistance & guidance related to
management of foreign trade & fiscal policy to its member
nations.
Acting as forum for trade liberalization.
Scope of WTO
• Trade in Goods.
• Trade Related Intellectual Property Rights (TRIPs).
• Trade Related Investments Measures (TRIMs).
• General Agreement on Trade in Services. (GATS).
Argument in Favour of WTO
Increase in foreign trade.
Increase in agricultural exports.
Increase in inflow of foreign investment.
Improvement in services.
Benefits for clothing & textile industry.
Inflow of better technology & better quality
products.
Benefits of multilateral trade system.
Benefits of using quality seeds & new varieties of
plants.
Restricts dumping.
O
T me
W e
r e
g
A n t s
GATT
•It all began with trade in goods. From 1947 to 1994,
GATT was the forum for negotiating lower customs duty
rates and other trade barriers; the text of the General
Agreement spelt out important rules, particularly non-
discrimination.
•Since 1995, the updated GATT has become the WTO’s
umbrella agreement for trade in goods.
•It has annexes dealing with specific sectors such as
agriculture and textiles, and with specific issues such as
state trading, product standards, subsidies and actions
taken against dumping.
GATS
•Banks, insurance firms, telecommunications
companies, tour operators, hotel chains and transport
companies looking to do business abroad can now enjoy
the same principles of freer and fairer trade that
originally only applied to trade in goods.
•These principles appear in the new General Agreement
on Trade in Services (GATS). WTO members have also
made individual commitments under GATS stating
which of their services sectors they are willing to open
to foreign competition, and how open those markets
are.
TRIPs
•The WTO’s intellectual property agreement amounts to
rules for trade and investment in ideas and creativity.
•The rules state how copyrights, patents, trademarks,
geographical names used to identify products, industrial
designs, integrated circuit layout-designs and
undisclosed information such as trade secrets —
“intellectual property” — should be protected when
trade is involved.
•In Nutshell , the TRIPs Agreement covers 7 categories of
intellectual property .
Dispute settlement System
The WTO’s procedure for resolving trade quarrels
under the Dispute Settlement Understanding is vital for
enforcing the rules and therefore for ensuring that
trade flows smoothly.
Countries bring disputes to the WTO if they think
their rights under the agreements are being infringed.
Judgements by specially-appointed independent
experts are based on interpretations of the agreements
and individual countries’ commitments.
TPRM
•The Trade Policy Review Mechanism’s purpose is to
improve transparency, to create a greater understanding
of the policies that countries are adopting, and to assess
their impact.
•Many members also see the reviews as constructive
feedback on their policies.
•All WTO members must undergo periodic scrutiny, each
review containing reports by the country concerned and
the WTO Secretariat.
WTO AND INDIAN
AGRICULTURE
• Introduction.
After over 7 years of negotiations the
Uruguay Round multilateral trade
negotiations were concluded on December
1993 and were formally ratified in April 1994
at Marrakesh, Morocco.
• The WTO Agreement on Agriculture was one
of the main agreements which were
negotiated during the Uruguay Round.
• The WTO Agreement on Agriculture contains provisions in 3 broad
areas of agriculture.
[Link] access.
[Link] support.
[Link] subsidies.
Market access.
• This includes tariffication, tariff reduction
and access opportunities.
• Tariffication means that all non-tariff barriers
such as...
1. quotas.
2. variable levies.
3. minimum import prices.
4. discretionary licensing.
5. state trading measures.
DOMESTIC SUPPORT.
• It includes measures that have a minimum
impact on the trade also known as green box
policies .
• It includes general government services like :
Research, Disease control, Infrastructure
and Food security .
• Also includes direct payments to producers
in form of income support etc .
EXPORT SUBSIDIES.
• The Agreement contains provisions regarding members commitment
to reduce Export Subsidies.
• Developed countries are required to reduce their export subsidy
expenditure by 36%.
• For developing countries the percentage cuts are 24%.
PRINCIPLES
Trade without discrimination
•Most-favoured-nation (MFN): treating other people
equally
•Under the WTO agreements, countries cannot normally
discriminate between their trading partners.
•Grant someone a special favour (such as a lower
customs duty rate for one of their products) and you
have to do the same for all other WTO members.
•This principle is known as most-favoured-nation (MFN)
treatment
National treatment: Treating foreigners and locals
equally
Imported and locally-produced goods should be
treated equally — at least after the foreign goods
have entered the market.
The same should apply to foreign and domestic
services, and to foreign and local trademarks,
copyrights and patents.
Freer trade: gradually, through negotiation - Lowering
trade barriers is one of the most obvious means of
encouraging trade.
The barriers concerned include customs duties (or
tariffs) and measures such as import bans or quotas
that restrict quantities selectively.
From time to time other issues such as red tape etc
have also been discussed.
Predictability: through binding and transparency -
Promise gives businesses a clearer view of their future
opportunities.
With stability and predictability, investment is
encouraged, jobs are created and consumers can fully
enjoy the benefits of competition — choice and lower
prices.
The multilateral trading system is an attempt by
governments to make the business environment
stable and predictable.
Promoting fair competition - The rules on non-
discrimination — MFN and national treatment — are
designed to secure fair conditions of trade.
So too are those on dumping (exporting at below cost
to gain market share) and subsidies.
Many of the other WTO agreements aim to support fair
competition: in agriculture, intellectual property,
services, for example.
Encouraging development and economic reform - The
WTO system contributes to development.
Over three quarters of WTO members are developing
countries and countries in transition to market
economies.
During the seven and a half years of the Uruguay
Round, over 60 of these countries implemented trade
liberalization programmes autonomously
Conclusion
• India, as a developing economy, has been benefitted
being a founding member of the World trade
Organization.
• The country at large has seen many significant changes
which have taken place after the formation of WTO.
• There are some issues which are yet to be sorted out
with the WTO and but by and large things are falling in
shape for the Indian Economy.
Assessment Pattern
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REFERENCES
• Reference Books-
• K. Aswathappa, Essentials of Business environment.
• Francis Cherrunilam, International Trade and Export Management, Himalaya Publications.
• References of websites-
• [Link]
• [Link]
[Link]
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THANK YOU