1 January, 1995Geneva, 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

(www.cbec.gov.in)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