WTO and GATT

Question 1

Introduction

Answer 1

Refer Acads

Question 2

GATT

Answer 2

The General Agreement on Trade and Tariffs is an agreement that was arrived at in 1947 by 23 countries to establish a free and fair international trading regime among member countries based on dismantling of trade barriers-tariffs or non-tariff restrictions like quotas.

Question 3

Round

Answer 3

Negotiations centered around a specific set of issues over a period of few years leading to agreement among member countries.

Eight rounds of such negotiations held under GATT

WTO was set up as a result of Uruguay Round.
WTO came into existence in 1995

Question 4

Uruguay Round

Answer 4

Longest round: 1986-94
Communism was collapsing
The model of Western industrial democracies was becoming more acceptable to world
USSR disintegrated leaving behind third world much more weaker

Question 5

Marrakesh Treaty

Answer 5

The director general of GATT prepared a Dunked Draft. After attaining consensus it was made into Marrakesh Treaty and was signed in 1994 paving the way for establishment of WTO in 1995

Question 6

GATT vs WTO

Answer 6

Gatt was a treaty while WTO is an Organisation
GATT had no dispute settlement body while WTO has one
WTO has a more extensive mandate (IPR, Services covered) than GATT

Question 7

Principles guiding WTO

Answer 7

Non-discriminatory and rule based trading system where foreign goods and services should receive same
treatment as domestically sourced one

Trade barriers should be dismantled and international trade should be free

Less developed countries should receive preferential treatment

Question 8

Voting system in WTO

Answer 8

One country one vote

No weighted System, Democratic

Question 9

Relation between UN and WTO

Answer 9

WTO is not a part of UN

Relationship provisions include

• Exchange of information
• Representation at each other’s meeting
• Cooperation between secretariats

Question 10

Structure of WTO

Answer 10

First Level:

a. Ministerial conference
- Highest level decision making body of WTO
- Meeting once every 2 years
- Each member country is represented by Commerce Minister

Second Level:

a. General Council: Carries out decisions of Ministerial conference. Consists of ambassadors or equivalent
b. Dispute Settlement Body: Not a separate body but GC acts as DSP while settling disputes
c. Trade policy Preview body

Third Level:

a. Council of trade
- Council of trade in goods
- Council of trade related aspects of IPR
- iCouncil of traden services

Director General: Head of WTO, 4 year term

Question 11

WTO members and Observers

Answer 11

156 members

28 country enjoy observer status

Condition to become a member: Do not have to be full sovereign nations. Instead they must be a customs territory with full autonomy in the conduct of their external commercial relations

.

Question 12

WTO: Dispute settlement

Answer 12

Dispute settlement body that settle disputes

How can disputes arise?
-Disputed can arise from trade policies of members that are in violation of WTO norms.

Requires 60 days of consultations among the disputant after which a dispute panel is set up.

No separate body but general council acts as DSB while settling disputes.

Reverse consensus: Ruling of panel should be adopted unless there is a consensus against the ruling

Retaliation: If erring country does not correct its laws then the complainant is allowed to take cross retaliatory measures.

Question 13

WTO: problems with Dispute settlement process

Answer 13

No punishment for the erring country

Poor countries can not retaliate against rich countries

Question 14

Agriculture: Agreements on Agriculture

Answer 14

Earlier developing countries resisted but gradually they agreed because of the concessions that were offered

Its three pillars are:

• Domestic support
• Export subsidies
• Market access

Question 15

Agriculture: Domestic support

Answer 15

Definition: It refers to subsidies that govt give to the farmers like food, fertilizer, power, water etc.

Green Box:

• Subsidies relate to research and development, income support and infrastructure like universities, roads in rural areas etc.
• Do not distort prices hence allowed without any limits

Amber box:

• It includes those domestic subsidies that impact market prices. For example, Food subsidy
• They need to be agreed at an agreed level. They distort trade & prices
• Developed countries are allowed less than Developing nations
• Formula of ‘Aggregate Measure of support’

Blue box:

• Subsidies that are direct payments to the farmers to limit their production as agriculture needs to play a multifunctional role that includes environmental protection, leaving land fallow
• Non distorting, no limit

Question 16

Agriculture: Export subsidies

Answer 16

These are to be limited by developed countries either in money or volume terms.

So that international prices don’t go below a level, an developing countries export are not priced out.

Nairobi Ministerial Conference: It was decided to phase them out in 2015.

Question 17

Agriculture: Market access

Answer 17

Market access means that all member nations should throw open their domestic markets to agriculture imports by reduction of tariffs and removal of non-tariff barriers

Countries should undertake:

• Tariffication: To Convert non-tariff barriers into tariffs
• Bind their tariffs to an agreed limit

Question 18

Agriculture: conclusion

Answer 18

AoA can be expected to, in the long run, benefit the developing nations that have cost advantage in its production. However, any such benefits are conditional on the developed countries reducing their subsidies