OLCBIBT01 – INTERNATIONAL BUSINESS AND TRADE

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CHAPTER 8 – WORLD TRADE ORGANISATION

Objectives:
a.) Identify the idea behind introducing GATT;
b.) Discuss the Uruguay Rounds package;
c.) Describe the motive behind establishments of WTO;
d.) Realise WTOs anti-dumping measures; and
e.) Evaluate WTOs impact on India.

A. INTRODUCTION
- World Trade Organisation (WTO) is a regulatory body that deals with the rules of
trade between nations at a global or near-global level.
- There are a number of ways, in which you can look at the WTO. It’s an organisation
for liberalizing trade. It’s a forum for governments to negotiate trade agreements. It’s
a place for them to settle trade disputes. It operates a system of trade rules.
- At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s
trading nations. These documents provide the legal ground-rules for international
commerce. They are essentially contracts, binding governments to keep their trade
policies within agreed limits. Although negotiated and signed by governments, the
goal is to help producers of goods and services, exporters, and importers conduct
their business, while allowing governments to meet social and environmental
objectives.
B. GENERAL AGREEMENTS ON TRADE AND TARIFF (GATT)
- GATT is a multilateral treaty among the member countries that lays down certain
agreed rules for conducting international trade. The member countries contribute
together to four-fifth of the total world trade.
- The basic aim of GATT is to liberalise world trade negotiations among members
countries and, for the last forty seven years, it has been concerned with negotiations
on the reduction, even the elimination of trade barriers — tariff and non-tariff —
between countries and improving trade relations so that the international trade flows

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freely and swiftly. It also provides a forum to member countries to discuss their trade
problems and negotiate to enlarge their trading opportunities.
- First Round - The first round of tariff negotiations, the Geneva Round, held in 1947
in Geneva from 10th April to 30th October 1947, was a part of the establishment of
the GATT.
- Second Round - The second conference for the negotiations was held at Annecy in
1949 with the aim: To facilitate the extension of GATT to countries which could not
participate in the Geneva conference, To add nine more countries to increase the
strength to 32.
- Third Round - This Round was known as the Torquay Round, 1951, and the
participants who attended this Round were 38 in number.
- Fourth Round - The Fourth Round, known as the Geneva Round 1956, was
attended by 26 countries.
- Fifth Round - It was known as the Dillon Round, Geneva, 1960-61, and was attended
by 26 countries.
- Sixth Round - This Round was known as the Kennedy Round, 1964-67, and was
attended by 62 participants.
- Seventh Round - This Round was known as the Tokyo Round, 1973-79, and was
attended by 102 participants.
C. URUGUAY ROUND PACKAGE
- The Eighth Round of GATT was known as Uruguay Round, 1986-93, and 123
countries participated in this Round. After seven years of protracted negotiations of
the eighth round of talks the decisions have been as under.
- The Uruguay Round was the eighth of the rounds of negotiations to be held under
the auspices of the General Agreement on Tariffs and Trade (GATT). The Round got
its name from the Ministerial Conference launching the negotiations in September
1986, which was held in Punta del Este, Uruguay. The negotiations were to have
been completed in four years, but because of the crises and deadlocks that
developed from time to time, they dragged on for over seven years. They were
formally concluded at the Ministerial Meeting held in April 1994 in Marrakesh,
Morocco. The Final Act embodying its results came into force on 1st January 1995.

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a. Factors Influencing the Launching
o Broadly speaking, three developments made some GATT member countries
feel that there was a need to hold a new round of negotiations.
o First, it had become evident that, although as a result of the adoption of
associate agreements the rules of GATT in a number of areas had been
strengthened, its rules were not being applied in two important trade sectors,
viz. agriculture and textiles. In the agricultural sector, most developed
countries had taken advantage of the loophole to establish policies that were
not always consistent with GATT principles. In the textile sector, a number of
these countries imposed restrictions on imports, particularly from developing
countries. They did this under the so-called Multi-Fibre Arrangement (the
Arrangement Regarding International Trade in Textiles or MFA), which
provided a legal cover for derogation from GATT rules against the use of
quantitative restrictions. Arrangements like the voluntary export restraints
(VERs) proliferated, under which some developed countries restricted
competitive imports of certain products. These measures had come to be
called “grey area measures” as there were doubts about their consistency with
GATT principles and rules.
b. Positive Factors Influencing the Negotiations
o The Uruguay Round negotiations lasted, as noted earlier, over seven years.
The reasons for the crisis that occurred from time to time are now of historical
interest. It would be sufficient to note for the purpose of this Guide that, in the
Round’s last phase and especially during its last two years, the deadlock
among the major players (particularly the United States of America and the
European Union) on certain crucial elements in the areas of agriculture and
trade in services delayed the successful conclusion of the Round.

c. Brief Description of the Results

o As multilateral negotiations generally involve compromises, the results do not
always meet the expectations of individual countries. It is often said that no
country leaves the negotiating table as a winner or as a loser. On the whole,

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however, the negotiations have brought about positive outcomes. In particular
they have resulted in: An improved framework of multilateral rules governing
international trade; and Further improvements in access to foreign markets for
both goods and services.
o One of the other achievements of the Round is the establishment of the World
Trade Organisation (WTO). GATT has ceased to be a separate institution and
has become part of WTO. The organisation is responsible for overseeing the
implementation of the multilateral rules. The improved mechanism that has
been adopted for consultations among member countries when differences
arise and for the settlement of disputes is expected to reduce trade friction.
The organisation also provides a continuing forum for negotiations among its
member countries on further trade liberalisation and for the elaboration of rules
in other areas with an impact on international trade.
d. Improved Framework of Rules
o The improved rules governing international trade are contained in three main
legal instruments: General Agreement on Tariffs and Trade (GATT) and its
associate agreements. These apply to trade in goods. General Agreement on
Trade in Services (GATS), which applies to trade in services. Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPS).
D. ESTABLISHMENT OF WTO
- The World Trade Organisation (WTO) was established on 1st January 1995.
Governments had concluded the Uruguay Round negotiations on 15th December
1993 and ministers had given their political backing to the results by signing the Final
Act at a meeting in Marrakech, Morocco, in April 1994. The ‘Marrakech Declaration’
of 15th April 1994, affirmed that the results of the Uruguay Round would strengthen
the world economy and lead to more trade, investment, employment and income
growth throughout the world.
a. Trade Without Discrimination
o The main principle that guided the erstwhile GATT and directs the present
incumbent, WTO, is to promote trade without discrimination. For almost 50
years, key provisions of GATT outlawed discrimination among members and

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between imported and domestically produced merchandise. According to
Article I, the famous “most favoured nation” (MFN) clause, members are
bound to grant to the products of other members treatment no less favourable
than that accorded to the products of any other country. A second form of non-
discrimination known as “national treatment” requires that once goods have
entered a market, they must be treated no less favourably than the equivalent
domestically produced goods. This is Article III of the GATT. Apart from the
revised GATT (known as “GATT 1994”), several other WTO agreements
contain important provisions relating to MFN and the national treatment.
Intellectual property protection by WTO members provides for MFN and
national treatment. The General Agreement on Trade in Services (GATS)
requires members to offer MFN treatment to services and service suppliers of
other members pre-shipment inspection; trade related investment measures
and the application of sanitary and phytosanitary measures.
b. Objectives of WTO
o In its preamble, the agreement establishing the World Trade Organisation
reiterates the objectives of GATT. These are: raising standards of living and
incomes, ensuring full employment, expanding production and trade and
optimal use of the world’s resources. The preamble extends these objectives
to services and makes them more precise.
o It introduces the idea of “sustainable development” in relation to the optimal
use of the world’s resources, and the need to protect and preserve the
environment in a manner consistent with various levels of national economic
development.
o It recognises that there is a need for positive efforts to ensure that developing
countries, and especially the least developed among them, secure a better
share of the growth in international trade.
c. Functions of WTO
o The agreement establishing WTO provides that it should perform the following
four functions:

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o First, it shall facilitate the implementation, administration and operation of the
Uruguay Round legal instruments and of any new agreements that may be
negotiated in the future.
o Second, it shall provide a forum for further negotiations among member
countries on matters covered by the agreements as well as on new issues
falling within its mandate.
o Third, it shall be responsible for the settlement of differences and disputes
among its member countries.
o Fourth, it shall be responsible for carrying out periodic reviews of the trade
policies of its member countries.
d. The WTO Structure
o Its highest authority – the Ministerial Conference — dominates the structure of
the WTO. This body is composed of representatives of all WTO members. It
meets at least every two years and is empowered to make decisions on all
matters under any of the multilateral trade agreements.
o The day-to-day work of the WTO is entrusted to a number of subsidiary bodies,
principally, the General Council, also composed of all WTO members, which
is required to report to the Ministerial Conference. The General Council also
convenes in two particular forms – as the Dispute Settlement Body and the
Trade Policy Review Body. The former overseas the dispute settlement
procedure and the latter conducts regular reviews of trade policies of individual
WTO members. The General Council delegates responsibility to three other
bodies, namely the Councils for Trade in Goods, Trade in Services and Trade-
Related Aspects of Intellectual Property Rights (TRIPS). The Council of Goods
overseas the implementation and functioning of all the agreements covering
trade in goods, though many such agreements have their own specific
overseeing bodies. The latter two Councils have responsibility for their
respective WTO agreements and may establish their own subsidiary bodies
as necessary.
e. The WTO Secretariat and Budget

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o The WTO Secretariat is located in Geneva. It has 155 members and is headed
by its Director General, Supachai Panitchpakdi, and four deputy directors. Its
responsibilities include the servicing of WTO delegate bodies with respect to
negotiations and the implementation of agreements. It has a particular
responsibility to provide technical support to developing countries, and
especially the least developed countries. WTO economists and statisticians
provide trade performance and trade policy analyses while its legal staff
assists in the resolution of trade disputes involving the interpretation of WTO
rules and precedents. Other secretariat work is concerned with accession
negotiations for new members and providing advice to governments
considering membership.
f. Norms for Joining WTO
o Most WTO members were previously GATT members who signed the Final
Act of the Uruguay Round and concluded their market access negotiations on
goods and services by the Marrakech meeting in 1994. A few countries which
joined the GATT later, in 1994, signed the Final Act and concluded
negotiations on their goods and services schedules, and became WTO
members. Other countries that had participated in the Uruguay Round
negotiations concluded their domestic ratification procedures only during the
course of 1995 and became members thereafter.
o Aside from these arrangements, which relate to “original” WTO membership,
any other state or customs territory having full autonomy in the conduct of its
trade policies may accede to the WTO on terms agreed with WTO members.
o In the first stage of the accession procedures, the applicant government is
required to provide the WTO with a memorandum covering all aspects of its
trade and economic policies having a bearing on WTO agreements. This
memorandum becomes the basis for a detailed examination of the accession
request in a working party.
o Alongside the working party’s efforts, the applicant government engages in
bilateral negotiations with interested members’ governments to establish its
concessions and commitments on goods and its commitments on services.

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This bilateral process, among other things, determines the specific benefits for
WTO members in permitting the applicant to accede. Once both, the
examination of the applicant’s trade regime and market access negotiations,
are complete the working party draws up basic terms of accession.
E. WTO AND ANTI-DUMPING MEASURES
- Article VI of the GATT provides for the right of contracting parties to apply anti-
dumping measures, i.e. measures against imports of a product at an export price
below its “normal value” (usually the price of the product in the domestic market of
the exporting country) if such dumped imports cause injury to a domestic industry in
the territory of the importing contracting party. More detailed rules governing the
application of such measures are currently provided in an Anti-Dumping Agreement
concluded at the end of the Tokyo Round. Negotiations in the Uruguay Round have
resulted in a revision of this agreement, which addresses many areas in which the
current agreement lacks precision and detail.
- In particular, the revised agreement provides for greater clarity and more detailed
rules in relation to the method of determining that a product is dumped, the criteria to
be taken into account in a determination that dumped imports cause injury to a
domestic industry, the procedures to be followed in initiating and conducting anti-
dumping investigations, and the implementation and duration of anti-dumping
measures. In addition, the new agreement clarifies the role of dispute settlement
panels in disputes relating to anti-dumping actions taken by domestic authorities.
- On the methodology for determining that a product is exported at a dumped price,
the new agreement adds relatively specific provisions on such issues as criteria for
allocating costs when the export price is compared with a “constructed’ normal value
and rules to ensure that a fair comparison is made between the export price and the
normal value of a product so as not to arbitrarily create or inflate margins of dumping.
- The agreement strengthens the requirement for the importing country to establish a
clear causal relationship between dumped imports on the industry concerned and
must include an evaluation of all relevant economic factors bearing on the state of
the industry concerned. The agreement confirms the existing interpretation of the
term “domestic industry”. Subject to a few exceptions, “domestic industry” refers to

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the domestic producers, as a whole, of like products or to those of them whose
collective output of the products constitutes a major proportion of the total domestic
production of those products.
F. INDIA AND WTO
- The Indian economy experienced a major transformation during the decade of the
1990s. Apart from the impact of various unilateral economic reforms undertaken
since 1991, the economy has had to reorient itself to the changing multilateral trade
discipline within the newly written GATT/WTO framework. The unilateral trade policy
measures have encompassed exchange-rate policy, foreign investment, external
borrowing, import licensing, custom tariffs and export subsidies. The multilateral
aspect of India’s trade policy refers to India’s WTO commitments with regard to trade
in goods and services, trade related investment measures, and intellectual property
rights.
- The multilateral trade liberalisation under the auspices of the Uruguay Round
Agreement and the forthcoming WTO negotiations is aimed at reducing tariff and
non-tariff barriers on international trade.
- India is a founding member of the GATT (1947) as well as of the WTO, which came
into effect from January 1, 1995. By virtue of its WTO membership, India
automatically avails of Most Favoured Nation Treatment (MFN) and National
Treatment (NT) from all WTO members for its exports and vice versa. Its participation
in this increasingly rule-based system is aimed towards ensuring more stability and
predictability in its international trade.

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REFERENCES:

Hill, C. W. L. International Business Competing in the Global Marketplace,

4th Edition, Tata McGraw-Hill Publishing Company Limited

Aswathappa, K., Business Environment for Strategic Management,

Mumbai: Himalaya Publishing House

Cherunilam, Francis, Business Environment, Mumbai: Himalaya

Publishing House

Vasudeva, P. K. (2010), International Marketing, 4th Edition, New Delhi:

Excel Books

LINKS
TOPICS LINKS FOR VIDEO
General Agreement on Trade and Tariff https://youtu.be/4hoA49qSitI
(GATT)
Uruguay Round Package https://youtu.be/RdA4tUVueAk

Establishments of World Trade https://youtu.be/8-voHl16vFE

Organisation
World Trade Organisation and Anti- https://youtu.be/FNz5EqMRqQo
Dumping Measures

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