The World Trade Organization (WTO) is the only global international organization dealing

with the rules of trade between nations. At its heart are the WTO agreements, negotiated and
signed by the bulk of the world’s trading nations and ratified in their parliaments.

The WTO has 164 members (including European Union) and 23 observer governments (like
Iran, Iraq, Bhutan, Libya etc).

What are the Goals of WTO?

The WTO’s global system lowers trade barriers through negotiation and operates under the
principle of non-discrimination.

The result is reduced costs of production (because imports used in production are
cheaper), reduced prices of finished goods and services, more choice and ultimately a
lower cost of living.
The WTO’s system deals with these in two ways.
- One is by talking: countries negotiate rules that are acceptable to all.
- The other is by settling disputes about whether countries are playing by those
agreed rules.
- The WTO can stimulate economic growth and employment.
- The WTO can cut the cost of doing business internationally.
- The WTO can encourage good governance. Transparency — shared information and
knowledge — levels the playing field.
- Rules reduce arbitrariness and opportunities for corruption.
 The WTO can help countries develop: Underlying the WTO’s trading system
is the fact that more open trade can boost economic growth and help countries
develop.
o In that sense, commerce and development are good for each other.
o In addition, the WTO agreements are full of provisions that take
into account the interests of developing countries.
 The WTO can give the weak a stronger voice: Small countries would be
weaker without the WTO. Differences in bargaining power are narrowed by
agreed rules, consensus decision-making and coalition building.
o Coalitions give developing countries a stronger voice in
negotiations.
o The resulting agreements mean that all countries, including the
most powerful, have to play by the rules. The rule of law replaces
might-makes-right.
 The WTO can support the environment and health: The trade is nothing
more than a means to an end. The WTO agreements try to make trade support
the things we really want, including a clean and safe environment, and to
prevent governments using these objectives as an excuse for introducing
protectionist measures.
 The WTO can contribute to peace and stability: When the world economy is
in turmoil, the multilateral trading system can contribute to stability.
 o Trade rules stabilize the world economy by discouraging sharp
backward steps in policy and by making policy more predictable.
They deter protectionism and increase certainty. They are
confidence-builders.
How did WTO came into Being?

From the early days of the Silk Road to the creation of the General Agreement on Tariffs and
Trade (GATT) and the birth of the WTO, trade has played an important role in supporting
economic development and promoting peaceful relations among nations.

 The General Agreement on Tariffs and Trade (GATT) traces its origins to
the 1944 Bretton Woods Conference, which laid the foundations for the post-
World War II financial system and established two key institutions,
the International Monetary Fund (IMF) and the World Bank.
o The conference delegates also recommended the establishment of
a complementary institution to be known as the International
Trade Organization (ITO), which they envisioned as the third leg
of the system.
o In Havana in 1948, the UN Conference on Trade and
Employment concluded a draft charter for the ITO, known as
the Havana Charter, which would have created extensive rules
governing trade, investment, services, and business and
employment practices.
 The Havana Charter never entered into force,
primarily because the U.S. Senate failed to ratify it. As
a result, the ITO was stillborn.
o Meanwhile, an agreement as the GATT signed by 23 countries in
Geneva in 1947 came into force on Jan 1, 1948 with the following
purposes:
 to phase out the use of import quotas
 and to reduce tariffs on merchandise trade,
 The GATT became the only multilateral instrument (not an institution)
governing international trade from 1948 until the WTO was established in 1995.
 Despite its institutional deficiencies, the GATT managed to function as a de
facto international organization, sponsoring eight rounds (A round is a series
of multilateral negotiations) of multilateral trade negotiations.
 So, the GATT became the only multilateral instrument governing international trade
from 1948 until the WTO was established in 1995.
 The Uruguay Round, conducted from 1987 to 1994, culminated in the Marrakesh
Agreement, which established the World Trade Organization (WTO).
o The WTO incorporates the principles of the GATT and provides a more
enduring institutional framework for implementing and extending them.
 o The GATT was concluded in 1947 and is now referred to as the GATT
1947. The GATT 1947 was terminated in 1996 and WTO integrated its
provisions into GATT 1994.
 The GATT 1994 is an international treaty binding upon all WTO
Members. It is only concerned with trade in goods.
Why WTO Replaced the GATT?

 The GATT was only a set of rules and multilateral agreements and lacked
institutional structure.
o The GATT 1947 was terminated and WTO preserved its provisions
in form of GATT 1994 and continues to govern trade in goods.
 The trade in services and intellectual property rights were not covered by
regular GATT rules.
 The GATT provided for consultations and dispute resolution, allowing a GATT
Party to invoke GATT dispute settlement articles if it believes that another
Party’s measure caused it trade injury.
o The GATT did not set out a dispute procedure with great specificity
resulting in lack of deadlines, laxity in the establishment of a
dispute panel and the adoption of a panel report by the GATT
Parties.
o It made the GATT as a weak Dispute Settlement mechanism.
What about the Cooperation between the WTO and the UN?

 Although the WTO is not a UN specialized agency, it has maintained strong

relations with the UN and its agencies since its establishment.
 The WTO-UN relations are governed by the “Arrangements for Effective
Cooperation with other Intergovernmental Organizations-Relations
between the WTO and the United Nations” signed on 15 November 1995.
 The WTO Director General participates to the Chief Executive Board which is
the organ of coordination within the UN system.
What is the Structure of Governance of WTO?

Ministerial Conference
 The topmost decision-making body of the WTO is the Ministerial Conference,
which usually meets every two years.
 It brings together all members of the WTO, all of which are countries or customs
unions.
 The Ministerial Conference can take decisions on all matters under any of the
multilateral trade agreements.
General Council
 The General Council is the WTO’s highest-level decision-making body located
in Geneva, meeting regularly to carry out the functions of the WTO.
  It has representatives (usually ambassadors or equivalent) from all member
governments and has the authority to act on behalf of the ministerial
conference which only meets about every two years.
 The General Council also meets, under different rules, as
o The General Council,
o the Trade Policy Review Body,
o and the Dispute Settlement Body (DSU)
 Three councils, each handling a different broad areas of trade, report to the
General Council:
o As their names indicate, the three are responsible for the
workings of the WTO agreements dealing with their respective
areas of trade.
o Again they consist of all WTO members.
The Trade Policy Review Body (TPRB)
 The WTO General Council meets as the TPRB to undertake trade policy
reviews of Members under the TPRM and to consider the Director-General's
regular reports on trade policy development.
 In Feb 2021, Nigeria's Ngozi Okonjo-Iweala was appointed as Director-
General of the World Trade Organisation (WTO), the leading international
trade body.
 The TPRB is thus open to all WTO Members.
Dispute Settlement Body (DSU)
 The General Council convenes as the Dispute Settlement Body (DSB) to deal
with disputes between WTO members.
 Such disputes may arise with respect to any agreement contained in the Final
Act of the Uruguay Round that is subject to the Understanding on Rules and
Procedures Governing the Settlement of Disputes (DSU).
 The DSB has authority to:
o establish dispute settlement panels,
o refer matters to arbitration,
o adopt panel, Appellate Body and arbitration reports,
o maintain surveillance over the implementation of recommendations
and rulings contained in such reports,
o and authorize suspension of concessions in the event of non-
compliance with those recommendations and rulings.
Appellate Body
 The Appellate Body was established in 1995 under Article 17 of
the Understanding on Rules and Procedures Governing the Settlement of
Disputes (DSU).
  The DSB shall appoint persons to serve on the Appellate Body for a four-
year term.
 It is a standing body of seven persons that hears appeals from reports issued
by panels in disputes brought by WTO Members.
 The Appellate Body can uphold, modify or reverse the legal findings and
conclusions of a panel, and Appellate Body Reports, once adopted by the
Dispute Settlement Body (DSB), must be accepted by the parties to the dispute.
 The Appellate Body has its seat in Geneva, Switzerland.

How has WTO Contributed to the World?

 The WTO is one of the three international organisations (the other two are the
International Monetary Fund (IMF) and the World Bank Group) which by and
large formulate and co-ordinate world economic policy. It is playing a crucial
role in:
o the international trade,
o global economics,
o and the political and legal issues arising in the international
business because of globalization.
 It has emerged as the world's most powerful institution for reducing trade
related barriers between the countries and opening new markets.
 It cooperates with the IMF and World Bank in terms of making cohesiveness
in making global economic policies.
 Through resolving trade related disputes, the WTO has got the potential
to maintain world peace and bilateral relations between its member countries
thorough following negotiations, consultations and mediations.
 Global trade rules: Decisions in the WTO are typically taken by consensus
among all members and they are ratified by members’ parliaments. This
leads to a more prosperous, peaceful and accountable economic world.
 Trade negotiations: The GATT and the WTO have helped to create a strong
and prosperous trading system contributing to unprecedented growth.
o The system was developed through a series of trade
negotiations, or rounds, held under the GATT. The 1986-94 round
– the Uruguay Round – led to the WTO’s creation.
o In 1997, an agreement was reached on telecommunications
services, with 69 governments agreeing to wide-ranging
liberalization measures that went beyond those agreed in the
Uruguay Round.
o Also in 1997, 40 governments successfully concluded negotiations
for tariff-free trade in information technology products, and 70
members concluded a financial services deal covering more than
 95% of trade in banking, insurance, securities and financial
information.
o In 2000, new talks started on agriculture and services. These
were incorporated into a broader work programme, the Doha
Development Agenda, launched at the fourth WTO Ministerial
Conference (MC4) in Doha, Qatar, in November 2001.
o At the 9th Ministerial Conference (MC9) in Bali in 2013, WTO
members struck the Agreement on Trade Facilitation, which aims
to reduce border delays by slashing red tape.
o The expansion of the Information Technology Agreement –
concluded at the 10th Ministerial Conference (MC10) in Nairobi in
2015 – eliminated tariffs on an additional 200 IT
products valued at over US$ 1.3 trillion per year.
o Most recently, an amendment to the WTO’s Intellectual Property
Agreement entered into force in 2017, easing poor
economies’ access to affordable medicines.
 The same year saw the Trade Facilitation
Agreement enter into force.
 WTO agreements:
o The WTO’s rules – the agreements – are the result of negotiations
between the members.
The current set is largely the outcome of the 1986- 94 Uruguay Round
negotiations, which included a major revision of the original General Agreement on
Tariffs and Trade (GATT).
- Goods: From 1947 to 1994, the GATT was the forum for negotiating lower tariffs
and other trade barriers, the text of the GATT spelt out important rules, particularly
non- discrimination. After 1994, WTO ratified new, comprehensive, integrated
GATT as GATT 1994.
What about the Cooperation between WTO and India?

 India is a founder member of the General Agreement on Tariffs and Trade

(GATT) 1947 and its successor, the WTO.
o India's participation in an increasingly rule based system in
the governance of international trade is to ensure more stability
and predictability, which ultimately would lead to more trade and
prosperity.
 Services exports account for 40% of India's total exports of goods and
services. The contribution of Services to India's GDP is more than 55%.
o The sector (domestic and exports) provides employment to around
142 million people, comprising 28% of the work-force of the
country.
 o India's exports are mainly in the IT and IT enabled sectors, Travel
and Transport, and Financial sectors.
o The main destinations are the US (33%), the EU (15%) and other
developed countries.
o India has an obvious interest in the liberalisation of services
trade and wants commercially meaningful access to be provided by
the developed countries.
o Since the Uruguay Round, India has autonomously liberalised
its Services trade regime across the board.
 Ensuring food and livelihood security is critical, particularly for a large
agrarian economy like India.
o India is persistently demanding for a permanent solution on
public stockholding subsidies at WTO.
 At 2013 Ministerial Conference (MC9) in Bali, an
interim agreement (a peace clause) was made on
“public stockholding” continuing exceptions that
allow developing countries to stockpile agricultural
products to protect against food shortages.
 India strongly favours extension of higher levels of protection to
geographical indications for products like Basmati rice, Darjeeling
tea, and Alphonso mangoes at par with that provided to wines and
spirits under the Trade-related Aspects of Intellectual Property Rights (TRIPS)
agreement.
 Developed countries have been putting pressure on inclusion of non-trade
issues such as labour standards, environmental protection, human
rights, rules on investment, competition policy in the WTO agreements.
o India is against any inclusion of non-trade issues that are directed
in the long run at enforcing protectionist measures (based on non-
trade issues, the developed countries like USA and European
Union are trying to ban the imports of some goods like textile,
processed food etc.), particularly against developing countries.
 At the recently held 12th MC of WTO, India opposed the continuation of a
moratorium on Customs Duties on electronic transmission (E-Transmission)
as it favors developed nations only.
o India and South Africa on several occasions have asked the
organization to revisit the issue and have highlighted the adverse
impact of the moratorium on developing countries.
o India wants the WTO to intensify the work programme on the e-
commerce sector.
o India has also stated that the Council for Trade in Goods, Council
for Trade in Services, Council for TRIPS (Trade Related Aspects of
Intellectual Property Rights) and the Committee for Trade and
 Development should take up discussions on e-commerce as per
their respective mandates originally set.
What are the Concerns Associated with WTO?

 In 2001, the WTO membership launched the “Doha Development Agenda” – a

massive attempt to update trading rules. The participating countries spent years
trying and failing to reach an agreement.
o A central problem in negotiation was the difficulty of getting well
over 150 countries to reach a consensus.
o In the previous negotiating round (The Uruguay Round, conducted
from 1987 to 1994), potential hold-out countries could
be threatened with exclusion from the new WTO.
 That trick could not be repeated once they were
already in.
 The 2017 WTO Ministerial Conference (MC11) Buenos Aires ended without
any substantial outcome as consensus failed the 164-member body.
o The USA blocked a permanent solution on government
stockholding for food security purposes, resulting in India’s
toughened stand on new issues including e-
commerce and investment facilitation.
 Developed countries led by the US and the European Union sought to find a
way out of the deadlock at the WTO talks by forming large pressure
groups on e-commerce, investment facilitation and MSMEs within the WTO
with more than 70 members in each formulation.
o Though WTO is driven by consensus and even a plurilateral
agreement needs approval of all members, the formation of these
groups as an attempt to steer WTO away from its focus on
multilateralism.
 It’s fierce defense of ‘Trade Related Intellectual Property’ rights (TRIPs)—
patents, copyrights and trademarks—comes at the expense of health and
human lives.
o WTO has protected for pharmaceutical companies’ ‘right to
profit’ against governments seeking to protect their people’s
health by providing lifesaving medicines in countries in areas like
sub-saharan Africa, where thousands die every day from
HIV/AIDS.
 The U.S.A. has consciously (or not) destroyed the Doha round of trade
negotiations process in formulating excessive demands that no country was
prepared to meet.
o The priority of the Obama administration was not to revive a
dying WTO negotiation, but to concentrate on its newly created
alternative, the TPP (Trans-Pacific Partnership), to contain its
competitors: Europe and China.
  For years now, the multilateral system for the settlement of trade dispute has
been under intense scrutiny and constant criticism.
o The U.S. has systematically blocked the appointment of new
Appellate Body members (“judges”) and de facto impeded the
work of the WTO appeal mechanism.
 Chinese mercantilism (try to influence trade and business, especially by
encouraging exports and putting limits on imports), the USA’s aggressive use
of unilateral tariff measures, and the inability of WTO members to reach
consensus on expanding its disciplines to important new sectors in the modern
economy reinforce the critique of the WTO.
 Lack of Transparency: There is a problem in WTO negotiations as there is no
agreed definition of what constitutes a developed or developing country at
the WTO.
o Members can currently self-designate as developing countries to
receive ‘special and differential treatment’ – a practice that is the
subject of much contention.
o For instance, China got the ‘developing country’ status at the
WTO which became a contentious issue with a number of
countries raising concerns against the decision.
What could be the Way Forward?

Since the WTO is consensus-based, reaching an agreement on reforms among all 164
members is extremely difficult. One possibility moving forward could be a plurilateral
agreement with a group of like-minded countries on a new set of rules that serve as an
addendum (supplement) to the broader WTO.

Conclusion

Today, the world is going through the protectionism, trade war (like USA & China), and
Brexit making global economy squeezed. The role of WTO in future is very crucial to
preserve global liberalised economic system evolved since the end of the 2nd World War.

It is right time when countries like USA giving threat to withdraw from WTO making it
dysfunctional, India and other emerging economies like Brazil, South Africa etc can provide
a strong base for strong WTO with saving interests of developing countries.