WTO_PRESENTATION.ppt for BBA first year student.

Brief Snapshot on WTO
 WTO GENESIS- Why WTO came into existence?
 Overview of WTO – its Principles & functions.
 Major Agreements
 Agreement on Agriculture
 Implication of AoA on World and on India
 Impact of WTO on other Indian Industry
 Impact of China’s entry into WTO on India
 Post WTO Global Scenario
 Future of WTO – Unresolved Issues
 Criticism

WTO Genesis -Why WTO came into existence?
GENERAL AGREEMENT ON TARIFFS & TRADE (GATT) – Predecessor to WTO:
 GATT was an aggrement
 Signed in 1946 as preparation for International Trade Organisation
(which never came into being), came into existence in 1947
 India was also signatory along with 22 other countries
 GATT – created set of global rules that governed trade in goods & sought:
 Substantial reduction in tariff and other barriers to trade &
 Eliminate discriminatory treatment in international commerce.
 8 rounds of negotiations had taken place during 5 decades of its existence.
 GATT’s weaknesses:
 It’s successful tariff reduction caused rise in use of non-tariff barriers (e.g. standards)
 Dispute resolution was non-binding
 8TH
Uruguay Round (1986-1993) long series of GATT negotiations
 Created the WTO – a permanent institution

WTO Genesis -Why WTO came into existence?
 WTO came into existence on 1.1.1995, precisely as a response to need for;
 more effective regulatory, supervisory and enforcement environment for world
trade & investment than the GATT could provide.
 WTO’s aim- is to promote free trade and stimulate economic growth.
 It is made up of a series of agreements and incorporates old GATT.
 GATT only focused on trade in goods, WTO's rules extended to include;
 Intellectual Property, Investment, Services, Telecommunications and Financial
services (banking).
GATT WTO
Ad hoc and provisional
Contracting parties
Trade in goods
Dispute based on consensus
•Permanent and legal
•Members
•Trade in goods, services, Trade & IPRS
•Faster, binding & Permanent mechanism

Overview
 World Trade Organization (WTO) is one of the most powerful
institutions in the world. It is an international, multilateral organization,
which sets the rules for the global trading system & resolves disputes
between its member states;
 It oversees global trade in goods & services and has 30 agreements.
 WTO headquarters are located in Geneva, Switzerland.
 Ngozi Okonjo-Iweala is the current Director-General .
 Currently - 159 members
 Mission -WTO aims to increase international trade by promoting lower
trade barriers and providing a platform for negotiation of trade & to
their business.

BASIC PRINCIPLES
 Non discrimination between countries:
 No Most Favoured Nation (MFN) Treatment - no special deals to trading
partners, all members of WTO must be treated the same
 No National Special Treatment - locals and foreigners are treated equally
 Freer trade: gradually through negotiations
 Predictability: Promising not to raise tariffs is called binding a tariff and
binding leads to greater certainty for businesses
 Promoting competition
 Encouraging Development and Economic Reform

WTO Functions
 Transparent, free and rule-based trading system.
 Provide forum for negotiations and common institutional framework for
conduct of trade relations among members
 Facilitate implementation, administration & operation of Multilateral Trade
Agreements
 Rules and Procedure Governing Dispute settlement – providing security and
predictability to system and preserving rights & obligations of Members
 Trade Policy Review Mechanism – designed to contribute to greater
transparency and understanding of trade policies and practices to members.
 Concern for LDCs (Least-developed countries) and NFIDCs(Net Food-
Importing Developing Countries)
 Concern on Non-trade issues like Food Security, Environment, Health etc.
 Coherence in global economic policy-making – cooperating with IMF and
world bank.
 Technical assistance and training for developing countries

WHAT WTO DOES NOT REQUIRE?
 Does not prevent member states from establishing their own trade
and non-trade policy objectives.
 Does not require them to eliminate all barriers to import of goods
and services.
 Does not direct national administrative and procedural system.
 Does not require member states to have a uniform set of trade
regulations.

Agreements
WTO oversees about 30 different agreements which have the status of
international legal texts. Member countries must sign and ratify all WTO
agreements on accession.
MULTILATERAL
 General Agreement on Tariffs and Trade (GATT 1994)
 Agreement on Agriculture AoA
 Agreement on the Application of Sanitary and Phytosanitary Measures(SPS)
 Agreement on Textiles and Clothing (Terminated on 1st
Jan, 2005)
 Agreement on Technical Barriers to Trade (TBT)
 Agreement on Trade-Related Investment Measures (TRIMs)
 Agreement on Pre-shipment Inspection (PSI)
 Agreement on Rules of Origin
 Agreement on Import Licensing Procedures
 Agreement on Subsidies and Countervailing Measures
 Agreement on Safeguards
 Agreement on Anti-Dumping (Agreement on Article VI)
 Agreement on Customs Valuation (Agreement on Article VII)

Agreements
 General Agreement on Trade in Services (GATS)
 Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS)
PLURILATERAL
 Agreement on Trade in Civil Aircraft
 Agreement on Government Procurement
 International Dairy Agreement
 International Bovine Meat-Agreement

WTO Agreement on Agriculture
 Signed as part of the Uruguay Round Agreement in April 1994.
 Came into force w.e.f 1 January, 1995. Had 10-year implementation
period from 1995 to 2004, for developing countries.
 Covers three broad areas of agriculture and trade policy:
 Market access,
 Domestic support and
 Export subsidies.
 Obligation to reduce domestic support or subsidies extended to
agriculture if support given is above permissible level of 10 per cent of
value of its agricultural output.
 Under the Agreement, there can be no restrictions on farm trade except
through tariffs -- i.e., non-tariff barriers such as quantitative restrictions on
imports through quotas, import licensing etc., are to be replaced by tariffs
or duties on imports to provide the same level of protection to domestic
agriculture and thereafter, tariff levels are to be progressively reduced.

Agreements
 Domestic support: structures(subsidies) into 3 categories or "boxes":
 Green Box: contains fixed payments to producers for environmental programmes e.g.
Research, Extension, so long as payments are ‘decoupled’ from current prodn.levels.
 Amber Box: contains domestic subsidies that governments have agreed to reduce but not
eliminate. Product Specific – MSP, Non-product specific (fertilisers, Power, Irrigation etc.)
 Blue Box: contains subsidies which can be increased without limit, so long as payments are
linked to production-limiting programmes.
 Market Access: refers to reduction of tariff (or non-tariff) barriers to trade by member-
states. The 1995 AoA required tariff reductions of:
 36% avg. reduction by developed countries, with a min.per tariff line redn.of 15% over 5yrs.
 24% avg.reduction by developing countries with a min.per tariff line redn.of 10% over 9yrs.
 LDCs exempted from tariff reductions, but either had to convert non–tariff barriers to tariffs-
called tariffication—or "bind" their tariffs, creating a "ceiling" can’t increase in future.
 Export subsidies
 Required developed countries to reduce export subsidies by at least 36% (by value) or by at
least 21% (by volume) over the five years to 2000.

India’s commitment to AoA
Market Access
 India maintaining Quantitative Restrictions due to balance of payments reasons
 The only commitment India has undertaken is to bind its
 Primary agricultural products at 100%;
 Processed foods at 150% and
 Edible oils at 300%.
Domestic Support
 India does not provide any product specific support other than market price support.
 Non-product specific subsidy for fertilizers, water, seeds, credit and electricity.
 Not undertaken any commitment in scheduled filed under GATT, since total AMS is
negative and that too by a huge magnitude,
Export Subsidies
 Exporters of agricultural commodities do not get any direct subsidy apart from
(a) exemption of export profit from income tax under section 80-HHC of Income Tax Act .
(b) subsidies on cost of freight on export shipments of certain products like fruits, vegetables etc.
 Indicated that India reserves the right to take recourse to subsidies (such as, cash
compensatory support) during the implementation period.

Implication of AoA for India
 India is under no obligation to reduce domestic support or subsidies
currently extended to agriculture as the support being given is well below
permissible level of 10 per cent of the value of its agricultural output.
 Anticipated increase in exports of agri-products has not materialised.
 Govt. have taken series of measures to safeguard agri-sector in context
of phase-out of QRs(quantitative restrictions) -- i.e.,
 import duties on a large number of agro and other items have been
substantially increased and
 import of 131 products have been made subject to compliance of Indian
quality standards as applicable to domestic goods;
 Govt. can raise the applied tariffs within the bound levels and also take
measures such as anti-dumping action, safeguard action, levy of
countervailing duties(tax on imported good to offset subsidies) under
certain circumstances.
 Food & livelihood security of our people, protection of the interest of
domestic farmers and maximising export opportunities for Indian
agricultural products are guiding principles of India's proposals at WTO
negotiations on agriculture.

Impact of WTO on other Indian Industry sector
Pharmaceuticals
 Threaten India's achievements in the pharmaceutical field, but most of
companies emerged as a winner.
 Forced 9 leading domestic pharma-companies to form Alliance
demanding more transparent WTO regime for EMR (exclusive marketing
rights) grants. Expecting a spate of mergers, acquisitions and alliances in
the domestic pharmaceutical industry in the coming years.
 Information technology
 Indian hardware and software companies can become major players in
the value-added arena.
 Availability of high-skilled of IT personnel and low cost of labour and
operation will allow India to compete in the international market.
 Textiles and clothing
 Phasing out of (Multi Fiber Agreement) MFA boosting textile exports from
India. Also increase in investment in textiles and joint ventures. But risk of
increase in import of textiles from countries e.g China, US, Taiwan etc.
 Forcing many textile manufacturers to modernise mills & improve quality.

Impact of WTO on other Indian Industry sector
 Liquor companies
 Government forced to slash import duties on foreign liquor brands,
affecting domestic liquor companies (Threat).
 Fear of Multinational liquor companies flooding Indian market with cheap,
second-hand products.
 Liquor companies gearing up to meet the global challenge, charting new
business plans to ensure that the local brands survive ultimately.
 The services sector
 Areas like banking, insurance, investment banking, health, and many
other professional services opened up are bound by WTO commitments.
 Many overseas service providers have entered into the services sectors in
the country, thereby reducing the chances of domestic enterprises.
 But experts believe India need not be frightened of the WTO rules on
services because the country at present has a distinct competitive
advantage in many areas that include health, engineering construction,
computer software and other professional services.

FUTURE OF WTO: UNRESOLVED ISSUES
 INCREASE IN ANTIDUMPING POLICIES:
 Many countries exploiting to pursue protection
 Many representative of businesses and their employees lobby Govt.
officials in countries – to protect domestic jobs from unfair foreign
competition.
 PROTECTIONISM IN AGRICULTURE:
 High level of tariffs and subsidies in the Agri sector of many economies
 Biggest defenders – advanced nations who want to protect their
agricultural sectors from comeptition by low-cost producers in developing
nations.
 PROTECTING INTELLECTUAL PROPERTY:
 Reducing piracy rates in drugs, software and music recordings would
have a significant impact on volume of world trade and increase in
incentive for producers to invest in the creation of intellectual property.
 AGENDA AGREED IN DOHA ROUND:
 Cutting tariffs on industrial goods and services, phasing out subsidies to
agri-producers, reducing barriers to cross-border investment (FDI) and
limiting use of Antidumping laws.

FUTURE OF WTO: UNRESOLVED ISSUES
LIKELY CONSEQUENCES OF TALKS BEING SUCCESSFUL:
 GAINERS
 Low-cost Agricultural producers in Developing nations and developed
nations (Austrlai and United States) will see the global markets for their
goods expand.
 Developing nations also gain from the lack of adherence on labor
standards.
 Sick and poor countries also benefit from guaranteed acees to cheaper
medicines.
 LOSERS:
 EU and Japanese farmers, US Steelmakers, environmental activists and
pharmaceutical firms of developed world.
 Expected to lobby their res[pective government hard in coming years to
make sure that final agreement is more in their favor.

Criticism
 Even though WTO is a fairly new institution, there has been public
scepticism and concern about how it functions since the beginning.
 When WTO was set up, the majority of developing countries were
not at the table and were barely consulted. As a result, the WTO
essentially protects MNCs based in the North and acts as a tool of
rich and powerful countries - notably US, EU, Japan and Canada.
 Although majority of other WTO members are developing countries
from Africa, Asia/Pacific and Latin America, many of them have little
to say in decisions that are taken at WTO meetings. Don't have
enough to offer from an economic standpoint to have any real power.
The influential nations in the WTO focus on their own commercial
interests. They also claim that the issues of health, safety and
environment are steadfastly ignored.
 It does not rectify the multiple violations of the general principles of
law which affect the dispute settlement mechanism.

Criticism
 Since Inception WTO has been a major focus for protests by civil
society groups– Environment, Social & Human Rights issues.
 It is often argued that subsidies are needed to protect small
farmers but, according to the World Bank, more than half of EU
support goes to 1% of producers while in the US 70% of subsidies
go to 10% of producers, mainly agri-businesses. The effect of
these subsidies is to flood global markets with below-cost
commodities, depressing prices and undercutting producers in
poor countries – a practice known as dumping.
 The AoA is criticized for reducing tariff protections for small
farmers – a key source of income for developing countries – while
allowing rich countries to continue to pay their farmers massive
subsidies which developing countries cannot afford.

Criticism
 Some examples of managing global economy impartially are:
1) rich countries are able to maintain high import duties and quotas in certain
products, blocking imports from developing countries (e.g. clothing);
2) the increase in non-tariff barriers such as anti-dumping measures allowed against
developing countries;
3) the maintenance of high protection of agriculture in developed countries while
developing ones are pressed to open their markets;
4) many developing countries do not have the capacity to follow the negotiations
and participate actively in the Uruguay Round; and
5) The TRIPs agreement which limits developing countries from utilizing some
technology that originates from abroad in their local systems

WTO_PRESENTATION.ppt for BBA first year student.

More Related Content

Similar to WTO_PRESENTATION.ppt for BBA first year student. (20)

More from eshitakashyap (18)

Recently uploaded (20)

WTO_PRESENTATION.ppt for BBA first year student.

Editor's Notes