DR.

RAM MANOHAR LOHIYA NATIONAL LAW

UNIVERSITY, LUCKNOW

Synopsis for project submission in International Trade Law-I

B.A LL. B 7th Semester

Project Topic- “1947 and WTO”

SUBMITTED TO: SUBMITTED BY:

Ms. Kirti Singh Abhishek Kumar Singh

Asst. Professor Dr. RMLNLU, Lucknow (Roll no 171)

 ACKNOWLEDGEMENT

This project venture has been made possible due to the generous co-operation of various
persons. Apart from the efforts taken by me, the success of this project depends largely on the
encouragement and guidance of many other people. I take this opportunity to express my thanks
to the people who have been instrumental in the successful completion of this project. To list
them all is not possible, even to pay them in words is beyond the domain of my lexicon. I would
like to express my sincere thanks and deep gratitude to Ms.Kirti Singh without whose thorough
and insightful guidance, this project work would not have been a success. I also express my
sincere thanks to the library staff of RMLNLU and my friends for their co-operation in my
endeavour.

Regards

Abhishek Kumar Singh

Sem VII
 TABLE OF CONTENTS

1.RESEARCH METHODOLOGY....................................................................................... 3

2.INTRODUCTION……….................................................................................................. 4

3. A BRIEF HISTORY OF THE WTO AND GATT……..…………………………….….6

4. PRINCIPLE OF GATT AND WTO...........................................................................…...8

5 ROLE OF INDIA AND WTO …...................................................................................... 9

6. STAUTUS OF DEVELOPING NATION IN WTO……………………………….…….10

7.ADVNTAGE AND DISADVANTAGE OF GATT……………………..……………….12

7.CONCLUSION............................................................................................................... 14

8. REFERENCES................................................................................................................ 15
 RESEARCH METHODOLOGY

1. OBJECTIVE OF STUDY:

The object is to study the Establishment of WTO and the establishment of GATT w.r.t to 1947 and its
consequences on International Trade.

2. SOURCES OF DATA:

Secondary sources of data are used for preparing this project.

3. METHOD:

Descriptive method is used for preparing this project.

4. HYPOTHESIS:

The General Agreement on Tariffs and Trade is established in 1947 with primary concerned with the
promotion of trade across the globe. GATT aims at expansion of international trade. Though it provides
that the countries should not impose such restrictions which hinder the trade between two or more
countries but if certain measures are adopted for the conservation of natural resources then they cannot
be challenged only on the ground that they are incompatible with various provisions of the GATT.
Later on in 1995 GATT was abolished and new international organisation was established for
international trade related issues WTO (World Trade Organisation).

5. RESEARCH QUESTIONS:

a) What is the objective behind the establishment of organisation like GATT in 1947?

b) Under what circumstances GATT was abolished in 1995 and WTO was established to address the
issue of International Trade related matters?

6. SCOPE:

The present project deals with the establishment of WTO and GATT in 1995 and 1947 respectively
and what are all the reason to abolish GATT upcoming of WTO.

7.METHOD OF CITATION:

Uniform mode of citation is used.

INTRODUCTION

The WTO agreements cover goods, services and intellectual property. They spell out the
principles of liberalization, and the permitted exceptions. They include individual countries’
commitments to lower customs tariffs and other trade barriers, and to open and keep open
services markets. They set procedures for settling disputes. They prescribe special treatment
for developing countries. They require governments to make their trade policies transparent
by notifying the WTO about laws in force and measures adopted, and through regular reports
by the secretariat on countries’ trade policies.

Since its inception in 1995, the World Trade Organization (WTO) has regularly been in the
news. There have been optimistic stories of expanding WTO membership that emphasize that
freer trade generates numerous benefits for consumers. Newspapers report on the details of
WTO entry negotiations for important countries like China and remind us of the gains from
trade. At other times, media reports might lead us to believe that disputes among WTO
members are about to tear the organization apart. Disagreements between the U.S. and the
European Union (EU) over everything from U.S. corporate taxation, to genetically modified
organisms, to special steel tariffs make headlines worldwide.
Finally, some groups seem unconvinced by and resentful of claims that free trade makes the
entire world better off. Huge numbers of people from environmental and labor groups gather
at various international meetings of heads of state and government ministers to protest
globalization in general and the WTO in particular. Some representatives of developing
countries are concerned that they have liberalized their trade and agreed to intellectual property
protection for developed country products but have received almost no additional access to
agricultural markets in the industrialized world.

What are we to make of all this? What is the WTO?

What is it trying to accomplish and why? How does the world trading system function? Why
are there so many disputes among countries that belong to the WTO? This article provides an
overview of the General Agreement on Tariffs and Trade, better known as GATT, and the
WTO system. In the first section, I present a brief history of GATT and the WTO. In the
following section, I discuss the fundamental principles that underlie the post-WWII world
trading system and explain how these principles work to increase welfare. In the third section,
I describe the numerous exceptions to GATT’s requirement of non-discrimination, or equal
treatment, and review the economics literature that seeks to explain the rationale for and
consequences of these exceptions. Then, I present a short summary of dispute resolution within
the WTO.

A Brief History Of The WTO and GATT

These agreements are often called the WTO’s trade rules, and the WTO is often described as
“rules-based”, a system based on rules. But it’s important to remember that the rules are
actually agreements that governments negotiated.

This project focuses on the Uruguay Round agreements, which are the basis of the present
WTO system. Additional work is also now underway in the WTO. This is the result of decisions
taken at Ministerial Conferences, in particular the meeting in Doha, November 2001, when
new negotiations and other work were launched. (More on the Doha Agenda, later.)

The World Trade Organization (WTO) and its predecessor, the General Agreement on Tariffs
and Trade (GATT) have been enormously successful over the last 50 years at reducing tariff
and other trade barriers among an ever-increasing number of countries. The predecessor to the
WTO began in 1947 with only 23 members; today it has 146 members, comprising
approximately 97 percent of world trade.1

Although the WTO, established in 1995, is relatively young for an international institution, it
has its origins in the Bretton Woods Conference at the end of World War II. At this conference,
finance ministers from the Allied nations gathered to discuss the failings of World War I’s
Versailles Treaty and the creation of a new international monetary system that would support
post-war reconstruction, economic stability, and peace. The Bretton Woods Conference
produced two of the most important international economic institutions of the post-war period:
the International Monetary Fund (IMF) and the International Bank for Reconstruction and
Development (the World Bank). Recognizing that the beggar-thy-neighbour tariff policies of
the 1930s had contributed to the environment that led to war, ministers discussed the need for
a third post-war institution, the International Trade Organization (ITO), but left the problem of
designing it to their colleagues in government ministries with responsibility for trade.

1
Jackson, John H. The World Trading System: Law and Policy of International Economic
Relations. Cambridge, MA: MIT Press, 1997 Pg-126.
Fundamental principles of the GATT/WTO system
The success of GATT as a dynamic institution that has fostered dramatic increases in
worldwide trade lies in its founding principles of reciprocity and non-discrimination.
Reciprocity refers to the practice that occurs in GATT
Negotiating rounds, whereby one country offers to reduce a barrier to trade and a second
country “reciprocates” by offering to reduce one of its own trade barriers. Reciprocity, the
practice of swapping tariff concessions, facilitates the reduction of trade barriers. Non-
discrimination, or equal treatment, means that if one GATT member offers a benefit or a tariff
concession to another GATT member, for example, a reduction in its import tariff for bicycles,
it must offer the same tariff reduction to all GATT members. Thus, non-discrimination extends
the benefits of a reciprocal tariff reduction beyond the two parties that initially negotiated it to
all GATT members. Together, these principles work toward increasing the efficiency of the
world trading system.
 INDIA IN THE GATT AND THE WTO
India was one of the 23 founding Contracting Parties to the General Agreement on Tariffs and
Trade (GATT) that was concluded in October 1947. The country’s leaders served as spokesmen
for developing-country concerns in the discussions that led to the GATT, and India has often
led groups of less developed countries in subsequent rounds of multilateral trade negotiations
(MTNs) under the auspices of the GATT.

India’s participation in these international economic negotiations is illustrative of its (and other
developing countries’) ambivalence toward the importance of trade and of the world trading
system in accelerating development. This history (recapitulated in detail in an appendix at the
end of this chapter) provides a broader sense of why India, along with other developing
countries, avoided international integration for decades. The legacy of the colonial era as
described in chapter 1 as a determinant of India’s distrust of the international economy is but
one part of the history.

The Uruguay Round Agreement, India, and Developing Countries

The Uruguay Round Agreement (URA) as a single undertaking includes agreement on
traditional GATT issues such as reductions of tariffs and tariff bindings, a not completely
successful attempt to bring agricultural trade under multilateral disciplines, a major revamping
and strengthening of the Dispute Settlement Mechanism (DSM), phasing out of the Multi-Fiber
Arrangement (MFA) that was an egregious violation of GATT principles, an agreement on
Trade-Related Investment Measures (TRIMs) and Trade-Related Aspects of Intellectual
Property Rights (TRIPS), and a new General Agreement on Trade in Services (GATS). Since
the conclusion of the Uruguay Round as envisaged, multilateral agreements on Financial
Services and Telecommunications have been concluded as part of
the GATS. In accord with the built-in agenda of the URA, a review of the agreements on
agriculture and TRIPS was initiated in 2000. Negotiations on leftover items of the GATS (e.g.,
movement of natural persons and maritime services) have been folded into the post-Doha
negotiation. We return below to the balance, from the perspective of developing countries, of
the benefits and costs of implementing the commitments undertaken
by the signatories of the URA.
The DSM of the WTO is stronger than the one in the GATT that it replaced. The GATT process
was essentially political. A country against which a complaint was lodged could prevent the
establishment of a panel to examine the complaint or veto the acceptance of the panel’s report
if one were established. The DSM of the WTO is a legal process: no member can prevent the
establishment of a panel, and a consensus is needed to overturn the report of its Appellate Body
if a party to a dispute appeals against the decision of the panel.

Although it is a good sign that many developing countries, including India, are using the
process and that powerful countries such as the United States and the European Union members
are abiding by its decisions, there is a serious danger of the DSM becoming inequitable.
Because the dispute settlement process is more legal than political, an adversarial system has
become its operating framework. Only those countries that can afford the costs of recognizing
and litigating the violation of their rights by others, as well as defending themselves in cases
brought against them make use of the system. Also, the DSM’s Appellate Body has become
very powerful, and in its interpretations of the GATT articles, particularly of Article XX, seems
to have gone beyond what the GATT founders intended. Besides, it has chosen to accept amicus
briefs from parties that do not represent WTO members. These are disturbing developments.
India stands to gain significantly if the market access commitments of the URA are
implemented in full and in good faith. Bergsten (1999) cites estimates of gains, ranging from
0.5 percent to more than 4.5 percent of

GDP for South Asia. Canonero and Srinivasan (1995) estimate that India’s bilateral trade with
the United States and the European Union in textiles and apparel will increase by 2.6 percent
and 4.3 percent respectively once the MFA is phased out. François et al. (1996) estimate gains
to South Asia in the range of 0.44 to 4.10 percent of GDP from the phase out of the MFA.
Much of the gain to South Asia is likely to accrue to its dominant economy, India.

India and the New Round of Multilateral Trade Negotiations

Reminiscent of its lack of enthusiasm for the Uruguay Round, India was reluctant, for several
reasons, to endorse the start of a new round of MTNs in the preparatory meetings for the Third
Session of the Ministerial of the Conference of the WTO in Seattle during late November 1999.
First of all, unlike agreements on earlier rounds of MTNs that largely covered commitments
on measures at the border such as tariffs and quotas, the URA
involved domestic policy commitments. Implementing the required behind the-border
commitments entailed institutional development more than merely changing a duty rate in the
customs code. The Uruguay Round “overlooked the costs of the institutional construction
needed for the least developed countries” (Odell 2002, 403). Signatories undertook several
“unprecedented obligations not only to reduce trade barriers, but to implement significant
reforms both on trade procedures (e.g., import licensing procedures customs valuation) and on
many areas of regulation that establish the basic business environment in the domestic economy
(e.g., technical, sanitary and phytosanitary standards, intellectual property law).”

Ostry has aptly described the shift from the GATT to the WTO system:
“the inclusion of the new issues and the creation of the new institution, the WTO, was to
transform the multilateral trading system”

The most significant feature of the transformation was the shift in policy focus from the border
barriers of the GATT to domestic regulatory and legal systems the institutional infrastructure
of the economy Implicit in this shift is a move away from a model of negative regulation what
governments must not do to positive regulations, or what governments must do”. Under the
single undertaking rule, participating countries had to accept all the multilateral agreements
related to goods and services, and also TRIPS understandings on dispute settlement and on
trade policy review mechanisms. Thus they had no option to pick and choose among the many
agreements for acceptance. In fact, there were only four pluri-lateral agreements (on civil
aircraft, government procurement, dairy, and bovine meat) that did not form part of the single
undertaking.
Second, a fairly strong case can be made that the URA was unbalanced: developing countries
undertook many costly commitments and obtained only a few commitments in return.
Industrialized countries agreed to phase out MFA quotas and undertake a limited liberalization
of agricultural trade. In fact, on balance, there was virtually no liberalization of agricultural
trade in the URA.2 Although subsidies on exports of manufactures (which some developing
countries offered to their infant manufactured exports) were made inconsistent, agricultural
export subsidies (which were used mainly by industrialized countries, particularly the members
of the European Union) were reduced, but not eliminated. It is true that developing countries
were given a longer time to implement their commitments as compared with industrialized

2
http://www.piie.com/publications/chapters_preview/98/3iie2806.pdf
countries. As the implementation began, however, many developing countries found that even
the longer implementation periods might not be long enough. India wanted the issues of
imbalance and implementation to be addressed before the start of any new round.

Terms of Reference and Panels ‘Jurisdiction

Although the old GATT did not provide any details on terms of reference, the 1979
Understanding improves and provides that the terms of reference are "to examine the matter
and to make such findings as will assist the CONTRACTING PARTIES in making the
recommendations or rulings provided for in paragraph 2 of Article XXIII.
'The DSU codifies and complements the GATT practice on this matter. Similarly, the standard
terms of reference within the WTO provides that a panel shall examine the matter in light of
the relevant provisions of the covered agreements and shall make such findings as will assist
the DSB. The verb assist fits well under the old GATT because within the WTO, the reverse
consensus rule for adoption of reports, panels, and the Appellate Body do more than merely
assist the DSB.3
Measure complained of (governmental measure, regulation, law, or policy), and the legal basis
of the claim (the provisions of the covered agreements concerned).
The terms of reference also contain a notifying function, providing the respondent and the third
parties in the panel process sufficient information of the claim in order to respond. No factual
finding needs to be stated in the terms of reference because the claimant has the burden to prove
or the respondent has the burden to rebut the facts of the case during the panel process.
As a procedural matter, Article 6.2 of the DSU requires the complainant to state in the terms
of reference whether consultations were held. The claimant prepares the terms of reference
based on the matters discussed. Without prior consultations, a panel request may be dismissed
because consultations are a first and mandatory step before the panel process can even
commence. Nevertheless, panels have no legal duty to make ex officio an enquiry on whether
consultations have actually taken place because a case may be heard in the absence of
consultations, so long as the respondent does not object. It is possible that consultations have
not taken place because the Member failed to provide an answer within the ten day requirement
or did not enter into consultations within the thirty day requirement. In such cases, the claimant
may proceed directly to the establishment of a panel, but must explain the reason why
consultations had not taken place. Direct resort to a panel will also be authorized if the other
Member refuses consultations or if the disputants jointly decide that Consultations will not
resolve the matter.

The advantages and disadvantages of GATT are as follows:

Advantages:

i. Membership of WTO is a step towards globalization with a potential of accelerated economic

growth and gains from trade and capital flows.

ii. Even though WTO commitments demand a country’s phased movement towards
liberalization and globalization, there is no harm per se in going this route; only, it should
proceed cautiously and judiciously. A developing country’s economy should be sufficiently
resilient and be ready to accept reforms if wants to grow and modernize.

iii. In addition to strengthening traditional export markets, membership of WTO provides a

better scope for exploring and developing new export markets and sources of inputs. This fact
is of special importance to developing countries because development of export markets boosts
growth multipliers.

Disadvantages

i. Conceptually, compatibility with WTO framework demands that the economy of a member
country should be primarily market-oriented. This limitation is particularly hard for developing
and poor countries which suffer from the ills of mass poverty and other similar problems.

ii. A country seeking membership of WTO does not have the choice of seeing specific
components and opting out of the others.

It cannot acquire membership of WTO without accepting all Agreements of WTO in their
totality. For this reason, a member country is obliged to pursue a path of liberalization and
globalization at a pace and on conditions determined by others.
iii. A developing country can hope to derive optimum benefit from its membership of WTO
only by improving the performance of its economy because of the competitive environment in
which it has to operate. It has to adapt quickly in order to survive in open waters.

iv. A developing country has to deal with the manuvoures of the corporate sector of the
developed countries. It must also face the reality that developed countries tend to pursue double
standards, and learn to cope as best it can with uneven playing fields.

Developed countries keep raising new issues for inclusion into agenda of negotiations and these
issues, instead of being advantageous to developing countries, are invariably disadvantageous
to them. In other words, poorer members of WTO have to be constantly on the defensive for
safeguarding their interests

CONCLUSION

The WTO was actually formed in 1995 to monitor GATT’s provisions, and the members of the
latter were all responsible for creating the WTO. Today, the WTO is constantly creating its
own set of rules and regulations and acts independently from other organizations. The WTO is
now recognized as the official body that governs the policies and standards of international
trade. In fact, it oversees over 95 per cent of the trading around the globe (almost all the
countries worldwide). This clearly excludes the giant, economic power of China. Perhaps this
Communist country feels more at a disadvantage if they join the WTO.

Looking back at GATT, it was formed in 1948 to improve cross-country trading and help
eradicate trade barriers through clear and sound negotiations. It was originally under the ITO
(International Trade Organization), which was supported by the U.N. Because of the failure to
ratify the ITO, GATT further evolved into what is now known as the WTO. Many have seen
GATT’s weakness throughout its years of operations. For one, it has been criticized because
of its lack of enforcement power which ended in so many disputes. Moreover, their provisions
were more or less temporary in nature a problem that is now addressed by the WTO in creating
more stringent rules and permanent legal provisions.

By contrast, the WTO is a more effective organization because it is actively involved in dispute
resolutions by accepting complaints and even imposing sanctions to the member at fault
whenever it is deemed appropriate. Unlike GATT, they treat their trading partners as WTO
members rather than naming them as simply contracting parties. They also widened the scope
of trade by including not only goods but also intellectual property rights and even services.

REFERENCES
Journals:

1. UNCTAD Series on Issues in International Investment Agreements II, WTO. United

Nations conference on trade and Development, New York and Geneva 2010
2. Do Countries Free Ride on WTO?, Rodney Ludema and Anna Maria Madya,
Department of Economics, University of Georgetown
3. The rise and Fall of MFN Clause, U.S. International Trade Commission Working Paper
, Pinar cebi and Rodney Ludema
4. Caplin, Andrew and Krishna, Kala. “Tariffs and the Most-Favored-Nation Clause: A
Game Theoretic Approach,” Seoul Journal of Economics, 1988, 1, pp. 267-289.
Books:
1. Hoda, Anwarul. Tariff Negotiations and Renegotiations under the GATT and the WTO:
Procedures and Practices. Cambridge: Cambridge Univeristy Press, 2001.
2. Jackson, John H. The World Trading System: Law and Policy of International
Economic Relations. Cambridge, MA: MIT Press, 1997.