ASSIGNMENT

ON

“WORLD TRADE ORGANIZATION”

UNDER THE GUIDENCE OF

Mr. .zakir hussain

BY
PRIYANKA RAO
6NI14064
ASIM
HYDERABAD
 WORLD TRADE ORGANIZATION

Overview

The World Trade Organization (WTO) is an organization that intends to supervise and
liberalize international trade. The organization officially commenced on January 1, 1995 under
the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT),
which commenced in 1948. The organization deals with regulation of trade between participating
countries; it provides a framework for negotiating and formalizing trade agreements, and a
dispute resolution process aimed at enforcing participants' adherence to WTO agreements which
are signed by representatives of member governments and ratified by their parliaments. Most of
the issues that the WTO focuses on derive from previous trade negotiations.

The WTO has 153 members, representing more than 97% of total world trade and 30 observers,
most seeking membership. The WTO is governed by a ministerial conference, meeting every two
years; a general council, which implements the conference's policy decisions and is responsible
for day-to-day administration; and a director-general, who is appointed by the ministerial
conference. The WTO's headquarters is at the Centre William Rappard, Geneva, Switzerland.

Principles of the trading system

The WTO establishes a framework for trade policies; it does not define or specify outcomes.
That is, it is concerned with setting the rules of the trade policy games. Five principles are of
particular importance in understanding both the pre-1994 GATT and the WTO:

1. Non-Discrimination. It has two major components: the most favored nation (MFN) rule,
and the national treatment policy. Both are embedded in the main WTO rules on goods,
services, and intellectual property, but their precise scope and nature differ across these
areas. The MFN rule requires that a WTO member must apply the same conditions on all
trade with other WTO members, i.e. a WTO member has to grant the most favorable
conditions under which it allows trade in a certain product type to all other WTO
members. "Grant someone a special favor and you have to do the same for all other WTO
members." National treatment means that imported goods should be treated no less
favorably than domestically produced goods (at least after the foreign goods have entered
the market) and was introduced to tackle non-tariff barriers to trade (e.g. technical
standards, security standards et al. discriminating against imported goods).

2. Reciprocity. It reflects both a desire to limit the scope of free-riding that may arise
because of the MFN rule, and a desire to obtain better access to foreign markets. A
related point is that for a nation to negotiate, it is necessary that the gain from doing so be
 greater than the gain available from unilateral liberalization; reciprocal concessions
intend to ensure that such gains will materialize.

3. Binding and enforceable commitments. The tariff commitments made by WTO

members in a multilateral trade negotiation and on accession are enumerated in a
schedule (list) of concessions. These schedules establish "ceiling bindings": a country can
change its bindings, but only after negotiating with its trading partners, which could mean
compensating them for loss of trade. If satisfaction is not obtained, the complaining
country may invoke the WTO dispute settlement procedures.

4. Transparency. The WTO members are required to publish their trade regulations, to
maintain institutions allowing for the review of administrative decisions affecting trade,
to respond to requests for information by other members, and to notify changes in trade
policies to the WTO. These internal transparency requirements are supplemented and
facilitated by periodic country-specific reports (trade policy reviews) through the Trade
Policy Review Mechanism (TPRM). The WTO system tries also to improve
predictability and stability, discouraging the use of quotas and other measures used to set
limits on quantities of imports.

5. Safety valves. In specific circumstances, governments are able to restrict trade. There are
three types of provisions in this direction: articles allowing for the use of trade measures
to attain noneconomic objectives; articles aimed at ensuring "fair competition"; and
provisions permitting intervention in trade for economic reasons.[37] Exceptions to the
MFN principle also allow for preferential treatment of developing countries, regional free
trade areas and customs unions

Functions

Among the various functions of the WTO, these are regarded by analysts as the most important:

• It oversees the implementation, administration and operation of the covered agreements.

• It provides a forum for negotiations and for settling disputes.

Additionally, it is the WTO's duty to review and propagate the national trade policies, and to
ensure the coherence and transparency of trade policies through surveillance in global economic
policy-making. Another priority of the WTO is the assistance of developing, least-developed and
low-income countries in transition to adjust to WTO rules and disciplines through technical
cooperation and training.

The WTO is also a center of economic research and analysis: regular assessments of the global
trade picture in its annual publications and research reports on specific topics are produced by
the organization. Finally, the WTO cooperates closely with the two other components of the
Breton Woods system, the IMF and the World Bank.

Four Basic Rules

1. Protection to Domestic Industry Through Tariffs:

a. The General Agreement on Tariffs and Trade (GATT) covers international trade in goods. The
workings of the GATT agreement are the responsibility of the Council for Trade in Goods
(Goods Council) which is made up of representatives from all WTO member countries. GATT
requires the member countries to protect their domestic industry/production through tariffs only.

b. It prohibits the use of quantitative restrictions, except in a limited number of situations.

2. Binding of Tariffs: The member countries are urged to

a. Eliminate protection to domestic industry/ production by reducing tariffs and removing other
barriers to trade in multilateral trade negotiations.

b. The reduced tariffs are bound against further increases by listing them in each country's
national schedule.

c. The schedules are an integrated part of the GATT legal system.

3. Most Favored-Nation (MFN) Treatment:

a. The rule lays down the principles of non-discrimination amongst member countries.

b. Tariff and other regulations should be applied to imported or exported goods without
discrimination among countries.

c. Exceptions to the rules i.e., regional arrangements subjected to preferential or duty free trade
agreements, Generalized System of Preferences (GSP) where developed
countries apply preferential or duty free rates to imports from developing countries.

4. National Treatment Rule:

The rule prohibits member countries from discriminating between imported products and
domestically produced like goods in the matter of internal taxes and in the application of internal
regulations.
Benefits of the WTO Trading System

1. The system helps to keep the peace.

This sounds like an exaggerated claim, and it would be wrong to make too much of it. Nevertheless, the
system does contribute to international peace, and if we understand why, we have a clearer picture of
what the system actually does.

2. The system allows disputes to be handled constructively.

As trade expands in volume, in the numbers of products traded, and in the numbers of countries and
companies trading, there are more opportunities for trade disputes to arise. The WTO system helps
resolve these disputes peacefully and constructively.

3. A system based on rules rather than power makes life easier for all.
The WTO cannot claim to make all countries equal. But it does reduce some inequalities, giving smaller
countries more voice, and at the same time freeing the major powers from the complexity of having to
negotiate trade agreements with each of their numerous trading partners.

4. Freer trade cuts the cost of living.

According to one calculation, consumers and governments in rich countries pay $350 billion per year
supporting agriculture enough to fly their 41 million dairy cows first class around the world one and a half
times

5. It gives consumers more choice, and a broader range of qualities to

choose from.
Think of all the things we can now have because we can import them: fruits and vegetables out of
season, foods, clothing and other products that used to be considered exotic, cut flowers from any part of
the world, all sorts of household goods, books, music, movies, and so on.

6. Trade raises incomes.

Lowering trade barriers allows trade to increase, which adds to incomes -- national incomes and personal
incomes. But some adjustment is necessary.

The fact that there is additional income means that resources are available for governments to
redistribute.
7. Trade stimulates economic growth, and that can be good news for
employment.
Trade clearly has the potential to create jobs. In practice there is often factual evidence that lower trade
barriers have been good for employment. But the picture is complicated by a number of factors.
Nevertheless, the alternative -- protectionism -- is not the way to tackle employment problems.

8. The basic principles make the system economically more efficient, and they
cut costs.
Many of the benefits of the trading system are more difficult to summarize in numbers, but they are still
important. They are the result of essential principles at the heart of the system, and they make life simpler
for the enterprises directly involved in trade and for the producers of goods and services.

Trade allows a division of labour between countries. It allows resources to be used more appropriately
and effectively for production.

But the WTO’s trading system offers more than that. It helps to increase efficiency and to cut costs even
more because of important principles enshrined in the system.

9. The system shields governments from narrow interests.

The GATT-WTO system which evolved in the second half of the 20th Century helps governments take a
more balanced view of trade policy. Governments are better-placed to defend themselves against
lobbying from narrow interest groups by focusing on trade-offs that are made in the interests of everyone
in the economy.

10. The system encourages good government.

Under WTO rules, once a commitment has been made to liberalize a sector of trade, it is difficult to
reverse. The rules also discourage a range of unwise policies. For businesses, that means greater
certainty and clarity about trading conditions. For governments it can often mean good discipline.