WTO

•  The WTO officially commenced on 1 January 1995 signed by 124

nations on 15 April 1994, replacing the 
General Agreement on Tariffs and Trade (GATT), which commenced in
1948.
• The WTO has 164 members and 23 observer governments. Liberia
became the 163rd member on 14 July 2016, and Afghanistan became
the 164th member on 29 July 2016.
• The World Trade Organization (WTO) deals with the rules of trade
between nations at a global or near global level.
• It is an organisation for liberalising trade and a forum for governments to
negotiate trade agreements and to settle trade arguments.
• It also operates a system of trade rules.
• The WTO is an organization that facilitates international trade.
• WTO was established with the principal objective as to provide the
common institutional framework for the conduct of trade relations among
its members in matters relating to the agreement.
• The WTO is geared towards the steadily growing volume of real income
and effective demand and expanding the production and trade in goods
and services through reciprocal and mutually advantageous arrangements
directed to the substantial reduction of TARIFF and other barriers and
elimination of discriminatory treatment in international trade relations.
• The WTO agreements cover a wide range of activities such as
agriculture, textiles and clothing, banking, telecommunications,
government purchases, industrial standards and product safety, food
and sanitation regulations and intellectual property.
• Under the WTO agreements, countries cannot normally discriminate
between their trading partners.
• Imported and locally produced goods should be treated equally.
• The same should apply to foreign and domestic services, and to
trademarks, copyrights and patents.
• WTO rules prescribe competition at a global scale and demand
national treatment for all goods and services, even foreign
investment.
• WTO Principles
• The following principles are the foundation of the multilateral trading
system: (i)Trade without discrimination Most-favored nation (MFN):
The WTO stipulates that countries cannot discriminate against other
member countries. However, there are special provisions that give
developing and least developed countries, which make up over three
quarters of WTO members, exclusive rights. For instance, they are
given more time to implement WTO agreements, assistance in
increasing their trade opportunities and support to help them build
the infrastructure they need for WTO work.
• (ii)Freer trade: Lowering trade barriers will encourage trade. Examples
of barriers include tariffs (or customs duties), import bans and quotas.
• (iii)Promote fair competition: The WTO discourages unfair trade
practices, such as export subsidies and dumping.
• (iv)Encourage development and economic reform: The WTO feels
developing countries deserve more time to implement WTO
agreements, thus they are more flexible with them than they are with
industrialized members. Industrialized countries are encouraged to
assist developing countries in their trading activities.
• Opportunities from WTO membership
• It is argued that economic globalisation boosts the world economy
and that global integration of small and landlocked countries like
Nepal through WTO membership can be instrumental for rapid
economic growth, poverty reduction and promotion of human
development.It can be observed that the government was keen to
join the WTO due to the following potential benefits offered by WTO
membership:
• Market access: Market access opportunities provided by the WTO
system can lead to further investment addressing the constraint of
limited domestic market for economic scale of productive operation,
which will also help to raise investment, economic production of goods
and services and industrialization process. The membership has also
secured extended market opportunities. Nepal‟s excessive reliance on
three exports markets—India, Germany and the United States (US)—had
made the country‟s export trade extremely vulnerable. It was therefore
expected that WTO membership would provide Nepal the opportunity to
explore other destinations for exports.
• Special and differential treatments: The WTO offers special and
differential treatments for LDCs like Nepal. These include longer
transition periods for the implementation of the agreements, technical
support, due restraint on disputes involving LDCs, and special treatment
while liberalizing the services sector.
• Transit right: One of the reasons why Nepal had sought membership of the General
Agreement on Tariffs and Trade (GATT) was the transit problem it had encountered
during the Indo-Nepal transit stalemate in 1989. It was expected that under the
GATT/WTO, Nepal would be granted access to the sea as a right as per Article V of
the GATT. In theory, as a WTO Member, Nepal should benefit from access to
international markets without discrimination.
• Policy stability: The WTO regime provides opportunity for policy stability internally
which is of utmost urgency in the context of the existing political instability in order
to provide an environment of predictability for investment and industrialization.
National policy decisions are locked to the framework of WTO provisions, which
enhance the credibility of the country in terms of economic governance .
• Attract foreign direct investment :Policy stability due to WTO membership provides
credibility to the nation in terms of economic activities with predictable
environment. Such environment is essential to attract foreign direct investment
(FDI) and technology to expedite industrialization process in Nepal. Additionally,
the mandatory provision of WTO in protecting intellectual property rights creates a
better situation for attracting investment.
• Gearing up domestic institutional capability: Joining WTO reflects national
commitment in gearing up domestic institutional capability in delivering services
related to trade and economic transactions. Similarly, the challenge to business
community in enhancing their competitive capability certainly builds pressure to
look at their own existing lapses and inefficiency, paving the way for the effective
actions to correct them. Therefore, WTO membership can be an effective excuse
in domestic constituency and private corporate culture to adopt and enforce
reform measures with drastic changes departing from traditional and status quo
oriented approach.
• Benefit from liberalization: Nepal has and could benefit from liberalization
through better allocation of natural resources towards industries with the
strongest advantages ,enhanced learning and newer technology from interacting
with the rest of the world, greater flexibility via trade, for dealing with shocks
and discouragement for rent seeking activities. The obligatory requirement of
transparency and self-discipline in economic policy making bestowed by WTO
membership would provide better environment for „entrepreneurship‟.
• Access to dispute settlement body: WTO‟s best achievement is
dispute settlement body. WTO membership would accord Nepal the
right to challenge in any measures taken by trading partners ,which
are against Nepal‟s economic and trade interest.
• Mobilization of trade related technical assistance: WTO provides and
has initiated the programs of aid for trade and Enhanced Integrated
Framework (EIF) to enhance the supply side capacity of the
developing countries. Nepal has participated in this process and it is
hoped that this will further help to build the trade capacity in the days
to come.
• Challenges to Nepal from WTO membership:
• Employment: At present,14 percent of the Nepalese workforce is
believed to be unemployed and 47 percent underemployed. To
achieve a higher level of production ,in terms of both quality and
quantity ,sophisticated machineries and better technology have to
raise production efficiency .It is machinery rather than labour that
allows to achieve the target of meeting the market demand on
schedule .Therefore it is very likely that the workforce is replaced
instantly by machineries like in developed economies.
• Negotiation for more benefits: The task of negotiation for accession
with the objective of gaining more and loosing less is challenging for
Nepal primarily due to lack of knowledgeable and skillful human
resources with the government as well as private sector.
• Strengthening institutions: Given the financial constraint of the government and the lack
of proper policy intervention to cope with the responsibility and obligations posed by the
WTO membership ,the task of strengthening institutions seems difficult to achieve.
• Specialization in some products and services: This is a challenging task of Nepal ,when
there is lack of proper physical and institutional infrastructure, capital and resources for
industrialization.
• Making industries cost effective: The old industries of Nepal need urgent restructuring
and modernization in order to make them capable of producing quality goods at a
competitive price .It is not possible to make industries cost effective without investment.
• Income distribution and Poverty: Since rules ,laws ,practices and norms of economic
and social nature are shaped as per the requirements of the global village, the economy
and society are put under the powerful influence of outside forces, such as INGOs and
MNCs. Local monopolies are also replaced by international monopolist whose interest is
not to co-operate with local government in resolving any social crisis but to reap
economic benefits. The process aggravates the problems of income and wealth
inequality, the rural-urban gap, poverty, unemployment and social and economic
dualism. The country is thus forced to remain in a low equilibrium poverty trap.
• Monopoly of MNCs in patent: Due to the intervention of MNCs in local
initiatives, due to huge research capacities and technological
advancement, MNCs are able to patent other countries resources
especially LDCs like Nepal.Basmati rice which is originated in South
Asia,was patented by one of the U.S.MNCS under the name of
„Taxomati‟.Similarly „turmeric‟ and „neem‟ was also being patented in
the U.S. recently a patent has been granted to a U.S. firm on
Karela(bitter gourd),Jamun (Sygimium cumini) and brinzal for anti-
diabetic properties despite their use being mentioned in several Indian
texts.
•