DEPARTMENT OF LAW

TRINITY INSTITUTE OF PROFESSIONAL STUDIES, DWARKA

BALLB: Fourth Semester

2021-2026

ECONOMICS-II

WORLD TRADE ORGANISATION

Submitted to: Submitted by:

RICHA ma’am Pranavi Challa

World Trade Organisation

Introduction

“Full participation, Inclusiveness and Transparency” (FIT) is the motto followed by the World
Trade Organisation. In brief, the World Trade Organization (WTO) is the only international
organization dealing with the global rules of trade. Its main function is to ensure that trade flows
as smoothly, predictably and freely as possible. the WTO is the successor to the General
Agreement on Tariffs and Trade (GATT) established in the wake of the Second World War.

It was established on January 1, 1995, in Geneva, Switzerland. It was created by the Uruguay
Round negotiations (1986-94), it has a total of 164 members representing 98% of world trade
organization.

Functions of World Trade Organization

Implementation of the WTO agreements

WTO ensures that governments of every member country make their trade policies in accordance
with the WTO agreements. WTO councils and committees ensure that WTO agreements are
properly implemented and all other requirements have been satisfied. To monitor the status of
such implementation, all members have to undergo a periodic review of their trade policies.

Trade negotiations

This is one of the most important functions of the WTO. WTO agreements include goods,
services, and intellectual property. These agreements are not fixed, they may be negotiated
according to the situation of one or more countries and their commitments to open trade markets.
The WTO provides exceptions to various principles of trade enshrined in WTO agreements. New
rules or agreements are also added from time to time.
Settling of disputes

Settling disputes arising between countries or with respect to trade is essential for the system of
international trade to run smoothly. The process for settling such disputes is provided in WTO
agreements. So, if any country thinks that its rights under any agreement have been infringed, it
can bring such disputes to the WTO. The WTO appoints independent experts to resolve its
disputes based on the interpretation of provisions of the WTO agreements and other relevant
factors.

Help countries build trade capacity

The WTO empowers developing countries to boost their trading capacity and help them develop
the skills and infrastructure required to expand their trade. It conducts various missions or
courses, especially focused on developing countries. Even in WTO agreements, special
provisions were provided for developing countries.

Enhancing cooperation between states and non-state actors

WTO remains in constant touch with various non-governmental organisations (NGOs), media,
parliamentary members, other international organisations, and the general public in order to get
their opinions on various aspects of WTO and ongoing negotiations and maintain their
cooperation in the international trading system.

Conducting economic research

The WTO conducts research in the field of trade and other economic activities and also collects
and disseminates various data and information in support of its activities.

Important principles of WTO with respect to the trading system

No discrimination in trade
According to the WTO agreements, countries cannot discriminate between two countries as
trading partners. They cannot grant some countries special favours in trade by lowering rates of
customs duty or taxes, etc. Every WTO member should be treated likewise. This principle is
known as Most-Favoured Nation (MFN) treatment. It means that if one nation lowers its trade
barriers or opens its market, it has to do the same for all other countries, which are its trading
partners. However, there are some exceptions to this general principle that are allowed. For
example, a government can set up a free trade agreement for certain goods to be traded with
certain countries.

Free trade

The WTO conducts its activities on the principle of “free trade” or “progressive liberalisation”. It
encourages nations to open their markets, lower their trade barriers, or restrict customs duties,
import bans, or quotas. Since its inception, it has continuously worked on this principle through
various rounds of negotiations and agreements, persuading countries by highlighting the benefits
of opening markets for international trade.

Transparency in the trading system

It is the duty of the WTO to ensure that the trade policies and rules of each member country are
transparent and easily predictable. These policies should not be subject to too many recurring
changes, they should be stable enough to avoid any inconsistencies in their understanding by
other countries. By discouraging quotas or import limits, which can lead to red-tapism or unfair
play, one can maintain stability or predictability.

Fair competition

The WTO is dedicated to establishing open and fair competition in the international trading
system. As it is based on the principle of non-discrimination in trade, it is successfully
establishing secure conditions for fair and undistorted competition.

Global Trade Rules

 1. Global rules of trade provide assurance and stability. Consumers and producers know
they can enjoy secure supplies and greater choice of the finished products, components,
raw materials and services they use.
2. Producers and exporters know foreign markets will remain open to them. This leads to a
more prosperous, peaceful and accountable economic world.
3. Decisions in the WTO are typically taken by consensus among all members and they are
ratified by members’ parliaments.
4. Trade frictions are channeled into the WTO’s dispute settlement process, where the focus
is on interpreting agreements and commitments and how to ensure that members’ trade
policies conform with them. That way, the risk of disputes spilling over into political or
military conflict is reduced.
5. By lowering trade barriers through negotiations among member governments, the
WTO’s system also breaks down other barriers between peoples and trading economies.
6. At the heart of the system – known as the multilateral trading system – are the WTO’s
agreements, negotiated and signed by a large majority of the world’s trading economies,
and ratified in their parliaments. These agreements are the legal foundations for global
trade. Essentially, they are contracts, guaranteeing WTO members important trade rights.
They also bind governments to keep their trade policies transparent and predictable
which is to everybody’s benefit.
7. The agreements provide a stable and transparent framework to help producers of goods
and services, exporters and importers conduct their business. The goal is to improve the
welfare of the peoples of the WTO’s members.

WTO agreements

The WTO’s rules – the agreements – are the result of negotiations between the members.
Through these agreements, WTO members operate a nondiscriminatory trading system that
spells out their rights and their obligations. Each member receives guarantees that its exports will
be treated fairly and consistently in other members’ markets. Each promises to do the same for
imports into its own market. The system also gives developing economies some flexibility in
implementing their commitments.

● Goods: It all began with trade in goods. From 1947 to 1994, the GATT was the forum for

negotiating lower tariffs and other trade barriers. It has annexes dealing with specific
sectors relating to goods, such as agriculture, and with specific issues such as product
standards, subsidies and actions taken against dumping.

● Services: Banks, insurance firms, telecommunications companies, tour operators, hotel

chains and transport companies looking to do business abroad enjoy the same principles
of more open trade that originally only applied to trade in goods. These principles appear
in the General Agreement on Trade in Services (GATS).

● Intellectual property: The WTO’s Intellectual Property Agreement contains rules for

trade in ideas and creativity. The rules state how copyrights, patents, trademarks,
geographical names used to identify products, industrial designs and undisclosed
information such as trade secrets – “intellectual property” – should be protected when
trade is involved.

● Dispute settlement: The WTO’s procedure for resolving trade conflicts under the Dispute

Settlement Understanding is vital for enforcing the rules and therefore for ensuring that
trade flows smoothly. Governments bring disputes to the WTO if they think their rights
under the WTO agreements are being infringed.

Structure

● Structure The WTO has 164 members, accounting for 98% of world trade.

● A total of 25 countries are negotiating membership. Decisions are made by the entire

membership.
● A majority vote is also possible but it has never been used in the WTO, and was

extremely rare under the WTO’s predecessor, the GATT. The WTO’s agreements have
been ratified in all members’ parliaments.

● The WTO’s top-level decision-making body is the Ministerial Conference, which meets

usually every two years.

● Below this is the General Council (normally ambassadors or heads of delegation based in

Geneva but sometimes officials sent from a member’s government) which meets several
times a year in the Geneva headquarters. The General Council also meets as the Trade
Policy Review Body and the Dispute Settlement Body.

● At the next level, the Goods Council, Services Council and Intellectual Property (TRIPS)

Council report to the General Council.

● Numerous specialized committees, working groups and working parties deal with the

individual agreements and other areas, such as the environment, development,

membership applications and regional trade agreements.

WTO Secretariat

● The WTO Secretariat, based in Geneva, has around 620 staff and is headed by a Director

General.

● It does not have branch offices outside Geneva. Since decisions are taken by the WTO’s

members, the Secretariat does not itself have a decision-making role.

● The Secretariat’s main duties are to

a) supply technical support for the various councils/ committees and the ministerial
conferences,
b) to provide technical assistance for developing economies,
c) to analyze world trade and to explain WTO activities to the public and media.
 d) The Secretariat also provides some forms of legal assistance in the dispute
settlement process and advises governments wishing to become members of the
WTO.

● The annual budget contributed by members is roughly 197 million Swiss francs.

WTO and the Sustainable Development Goals (SDGs)

SDG1: No poverty

Opening markets and trade can grow more opportunities for low-income countries and can uplift
their living standards through increased competition, better prices of goods and services, and
more choices for consumers.

SDG2: Zero hunger

The WTO also plays an important role in achieving food security through its reformed trade
policies for agricultural goods. By eliminating subsidies on agricultural produce, fairer prices in
competitive markets can be ensured.

SDG3: Good health and well-being

WTO also plays a significant role in ensuring affordable medicines to all countries, especially
the least developed nations.

SDG8: Decent work and economic growth

By increasing trade capacities and creating various economic opportunities for the countries that
were less developed, it ensures good economic growth and a decent work environment for them.

SDG9: Reduced inequalities

WTO seeks to bridge the gap between developing and developed nations through various
initiatives based on the principle of “Special and Differential Treatment for Developing
Countries,” which especially focuses on developing nations taking into account their capacity
constraints.