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International Economic Organisations - World Trade Organization (WTO) | 12th Economics : Chapter 8 : International Economic Organisations

Chapter: 12th Economics : Chapter 8 : International Economic Organisations

World Trade Organization (WTO)

The WTO was established in 1995 as a successor to the GATT.

World Trade Organization

The WTO was established in 1995 as a successor to the GATT. It is a new international organization set up as a permanent body and is designed to play the role of watch dog in the spheres of trade in goods and services, foreign investment and intellectual property rights. The Dunkel Draft, formulated by Arthur Dunkel, its Secretary General became the base for WTO.

Every two years, the member countries’ Commerce Ministers Conference are being organized to discuss and settle the important souls and trade related matters. The first WTO conference was held at Singapore in 1996. The recent conference was held at Argentina in 2017. It was planned to organize 12th ministerial conference at Kazakhstan in 2020.

World Trade Centre

WTC headquarters located at New York, USA. It featured the landmark Twin Towers which was established on 4th April 1973. Later it was destroyed on 11th September 2001 by the craft attack. It brings together businesses involved in international trade from around the globe.


1. Objectives of WTO

The basic aim is to expand international trade and bring about economic prosperity by liberalizing trade restrictions.

i.               To ensure reduction of tariff and other barriers.

ii.               To eliminate discrimination in trade.

iii.               To facilitate higher standard of living.

iv.               To facilitate optimal use of world’s resources.

v.               To enable the LDCs to secure fair share in the growth of international trade.

vi.               To ensure linkages between trade policies, environmental policies and sustainable development.


WTO Agreements

Agreement on Trade Related Intellectual Property Rights (TRIPs)

Intellectual Property Rights include copy right, trade marks, patents, geographical indications, trade secrets, industrial designs, etc. TRIPS Agreement provides for granting product patents instead of process patents. The period of protection will be 20 years for patents, 50 years for copy rights, 7 years for trade marks and 10 years for layout designs. As a result of TRIPS, the dependence of LDCs on advanced countries for seeds, drugs, fertilizers and pesticides has increased. Farmers are depending on the industrial firm for their seeds.

Agreement on Trade Related Investment Measures (TRIMs)

TRIMs are related to conditions or restrictions in respect of foreign investment in the country. It calls for introducing equal treatment for foreign companies on par with national companies. TRIMs were widely employed by developing countries. Restrictions on foreign investment on following grounds are to be removed.

·            No restriction on area of investment.

·            No binding on use of local material.

·            No mandatory exports.

·            Norestrictiononrepatriationofroyalty, dividend and interest.

·            No trade balancing requirement, i.e. imports not exceeding exports.

General Agreement on Trade in Services (GATS)

GATS is the first multilateral set of rules covering trade in services like banking, insurance, transportation, communication, etc., All member countries are supposed to extend MFN (Most Favoured Nation) status to all other countries without any discrimination. Transparency should be maintained by publishing all relevant laws and regulations over services.

Phasing out of Multi Fibre Agreement (MFA)

The multi fibre agreement governed the world trade in textiles and garments since 1974. It imposed quotas on export of textiles by developing nations to the developed countries. This quota system was to be phased out over a period of ten years. This was beneficial to India.

Agreement on Agriculture (AoA)

Agriculture was included for the first time under GATT. The important aspects of the agreement are Tariffication, Tariff cuts and Subsidy reduction.

Dispute Settlement Body

The Disputes Settlement Body puts an end to procedural delays. It is mandatory to settle any dispute within 18 months. The disputes are resolved through multilateral trading system. However, India has lost a huge export earnings because of the conditions laid out by the Body.


2.  Functions of WTO

The following are the functions of the WTO

i) It facilitates the implementation, administration and operation of the objectives of the Agreement and of the Multilateral Trade Agreements.

ii) It provides the forum for negotiations among its members, concerning their multilateral trade relations in matters relating to the agreements.

iii) It administers the Understanding on Rules and Procedures governing the Settlement of Disputes.

iv) It cooperates with the IMF and the World Bank and its affiliated agencies with a view to achieving greater coherence in global economic policy making.

Major WTO Functions

v Administering WTO trade agreements

v Forum for trade negotiations

v Handling trade disputes

v Monitoring national trade policies

v Technical assistance and training for developing countries

v Cooperation with other international organizations


3.  Achievements of WTO

The major achievements of WTO are as follows

1. Use of restrictive measures for BoP problems has declined markedly;

2. Services trade has been brought into the multilateral system and many countries, as in goods, are opening their markets for trade and investment;

3. The trade policy review mechanism has created a process of continuous monitoring of trade policy developments.

WTO Ministerial Conferences


12. Kazakhstan - 2020

11. Buenos Aires, 10-13 December 2017

10. Nairobi, 15-18 December 2015

09. Bali, 3-6 December 2013

08. Geneva, 15-17 December 2011

07. Geneva, 30 November - 2 December 2009

06. Hong Kong, 13-18 December 2005

05. Cancún, 10-14 September 2003

04. Doha, 9-13 November 2001

03. Seattle, November 30 – December 3 1999

02. Geneva, 18-20 May 1998

01. Singapore, 9-13 December 1996


4. WTO and India

India is the founding member of the WTO. India favours multilateral trade approach. It enjoys MFN status and allows the same status to all other trading partners. India benefited from WTO on following grounds:

1. By reducing tariff rates on raw materials, components and capital goods, it was able to import more for meeting her developmental requirements. India's imports go on increasing.

2. India gets market access in several countries without any bilateral trade agreements.

3. Advanced technology has been obtained at cheaper cost.

4. India is in a better position to get quick redressal from the trade disputes.

5. The Indian exporters benefited from wider market information.

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