WORLD TRADE ORGANISATIONStructure, Functions, Tasks, Challenges&Strategies
...e open to representatives of all WTO Members. They may also establish subsidiary bodies, such as committees and working parties. Council for Trade in Goods The Council for Trade in Goods oversees the functioning of the multilateral agreements on trade in goods. These include the General Agreement on Tariffs and Trade (GATT) and related Understandings, and twelve other agreements, as contained in Annex 1A to the WTO Agreement. Council for Trade in Services The Council for Trade in Services oversees the functioning of the General Agreement on Trade in Services (GATS). Council for TRIPs The Council for TRIPs oversees the functioning of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs Agreement). Committees and other subsidiary bodies Three main committees are established by the WTO Agreement: the Committee on Trade and Development, the Committee on Balance-of-Payments Restrictions, and the Committee on Budget, Finance and Administration. Membership of these committees is also open to all Members of the WTO. The General Council has established two other committees reporting to it: the Committee on Trade and Environment and the Committee on Regional Trade Agreements. Decision-making The WTO continues the practice of decision-making by consensus followed under the GATT 1947. Consensus is defined as the situation where no Member, present at a meeting where a decision is taken, formally objects to the proposed decision. However, it is recognized that there may be situations where a consensus cannot be reached, in which case the matter may be decided by voting. Voting rules are set out in the WTO Agreement. WTO: BASIC PRINCIPLES Trade without discrimination The basic principles of the multilateral trading system, as embodied in the WTO Agreement, derive mostly from the principles that constituted the foundations of the GATT. Trade without discrimination is one of these basic principles, guaranteed through the operation of various clauses included in the multilateral agreements on trade in goods, in the GATS, and in the TRIPs Agreement. Most-favoured-nation clause (MFN) The most-favoured-nation clause has been the pillar of the system since the inception of the GATT in 1947. The Contracting Parties to the GATT 1947 were bound to grant to the products of other contracting parties treatment no less favourable than that accorded to products of any other country. Members of the WTO have entered into similar commitments, under the GATT 1994 (Article I) for trade in goods, under the GATS (Article II) in relation to treatment of service suppliers and trade in services, and under the TRIPs Agreement (Article 4) in regard to the protection of intellectual property. National treatment The national treatment principle condemns discrimination between foreign and national goods or services and service suppliers or between foreign and national holders of intellectual property rights. GATT 1994 and the TRIPS Agreement provide for national treatment as one of the main commitments of WTO Members. Imported goods, once duties have been paid, must be given the same treatment as like domestic products in relation to any charges, taxes, or administrative or other regulations (GATT Article 3). With regard to the protection of intellectual property rights, and subject to exceptions in existing international conventions, Members of WTO are committed to grant to nationals or other Members treatment no less favourable than that accorded to their own nationals (Article III). GATS, however, due to the special nature of trade in services, deals with national treatment under its Part III, Specific Commitments, (Article XVII), where national treatment becomes a negotiated concession and may be subject to conditions or qualifications that Members have inscribed in their schedules on specific commitments in trade in services. Transparency Provisions on notification requirements and the Trade Policy Review Mechanism are set out in the WTO Agreement and its Annexes, with the objective of guaranteeing the fullest transparency possible in the trade policies of its Members in goods, services and the protection of intellectual property rights. Article X of GATT 1994 deals with the publication and administration of trade regulations; Article III of GATS sets out provisions on transparency as one of the general obligations and disciplines under that agreement; and Article 3 establishes transparency rules for the TRIPs Agreement. Predictable and growing access to markets Predictable and growing access to markets for goods and services is an essential principle of the WTO. This principle is fulfilled through various provisions so as to guarantee security, predictability and continued liberalization of trade. Trade in goods In the case of goods, a basic GATT postulate is that tariffs should normally be the only instrument used to protect domestic industry. Furthermore, tariffs should be predictable and stable Binding of tariffs Security and predictability in trade in goods are achieved through the commitments embodied in the "binding of tariffs". A "bound" tariff is a tariff in respect of which there is a legal commitment not to raise it beyond the bound level. The binding of a tariff at a level higher than the tariff actually applied is considered as a legitimate concession. In this case, the concession is the binding itself, that is, the commitment not to raise the tariff beyond that level. The developed countries have normally bound their tariffs at the applied levels. By contrast, and consistently with open market policies, developing countries have adopted commitments on "ceiling bindings", that is, bindings at levels higher than the applied rates. This has allowed developing countries to substantially increase their bound commitments, thus underpinning their open markets policies, while keeping a certain margin for protection in case of need. Prohibition of quantitative restrictions As a general rule, quantitative restrictions are prohibited under the GATT 1994. However, in some cases, such as safeguard action, quantitative restrictions can be introduced under strictly defined criteria. Tariff negotiations: progressive reduction in protection In the past, tariff negotiations were launched periodically under the auspices of the GATT. These negotiations served to reduce progressively the level of tariff protection in many countries now Members of the WTO. Tariff negotiations will remain important in the future, particularly in relation to agricultural products, where all non-tariff barriers have been eliminated and substituted by tariffs, in many cases at very high levels... Emergency import measures: safeguards A safeguard measure is an import restriction which can be adopted in emergency circumstances, when imports have increased in such quantities and conditions that they are the cause of serious injury or threat of such injury to a domestic industry producing a like or directly competing product. An agreement on safeguards, setting out conditions and criteria for these actions, is one of the multilateral trade agreements. Measures affecting a price, that is tariffs, are preferable to quantitative restrictions. However, quantitative restrictions can be applied as safeguard measures in specific cases. Tariff renegotiations: compensation The contractual nature of a bound tariff concession lies in the fact that the tariff rate cannot be increased beyond the bound level. However, countries would not enter into this kind of commitment without the possibility of revision when the situation of a domestic industry so requires. The GATT 1994 allows for the possibility of renegotiations. A Member desiring to withdraw or modify tariff bindings has to renegotiate them with other interested Members and provide compensation, that is, substantially equivalent tariff concessions on other products. Trade in services The General Agreement on Trade in Services (GATS) establishes a multilateral framework of principles and rules for trade in services with a view to the expansion of such trade under conditions of transparency and progressive liberalization, and as a means to promote the economic growth of all countries and the development of developing countries. Through general obligations and principles, the negotiation of specific commitments, and the commitment to launch further rounds of negotiations on trade in services, the GATS seeks to achieve predictable and growing access to markets for services. WTO: DISPUTE SETTLEMENT The integrated dispute settlement system The integrated dispute settlement system is an important part of the multilateral trading system embodied in the WTO. It is based on Articles XXII and XXIII of the GATT 1994, and the rules and procedures further elaborated in the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) contained in the WTO Agreement. The rules have evolved on the basis of past practice in GATT 1947. Coverage: goods, services and intellectual property The dispute settlement system covers all the multilateral trade agreements, that is, it is applicable to trade in goods, trade in services, and intellectual property issues arising from the TRIPs Agreement. It is also applicable to disputes arising under the plurilateral Government Procurement Agreement. Some of these agreements have dispute settlement provisions that apply only to disputes arising under that specific agreement that add to or change the rules of the DSU. The dispute settlement system is administered by the Dispute Settlement Body. Procedures: strict time-limits The dispute settlement process is initiated through a request for consultations made by one Member to another in respect of a specific issue. If consultations fail to resolve a dispute, a Member may ask the DSB to establish a panel, normally consisting of three independent trade experts, to rule on the issue. After hearing the parties, the panel issues a report to the DSB. For the panel, strict time-limits have been agreed so as to achieve the greatest efficiency possible under the system. A large degree of automaticity is involved in this process. Adoption of panel reports: the reverse consensus Under GATT practice, the report of a panel was submitted to the GATT Contracting Parties for adoption. Since the Contracting Parties normally took decisions by consensus, any Party (including the losing Party) could block adoption of a panel report. While this did not occur frequently, it happened from time to time. An innovative formula has been agreed upon in the DSU, whereby a consensus in the negative is required in order not to adopt a panel report. This formula allows for a smoother functioning of the system. Appellate Body Review The WTO dispute settlement mechanism gives the possibility of appeal to either party in a panel proceeding. However, any such appeal must be limited to issues of law covered in the panel report and the legal interpretations developed by the panel. Appeals are heard by a standing Appellate Body consisting of seven members appointed by the DSB for four year terms. The report of the Appellate Body must be unconditionally accepted by the parties to the dispute, and the report is to be adopted by the DSB unless there is a negative consensus, that is a consensus against adoption. Non-compliance with recommendations The Dispute Settlement Body keeps under surveillance the implementation of adopted recommendations or rulings, and any outstanding issue remains in its agenda until its resolution. Time-limits are also established for compliance with recommendations of panel reports. When a party is unable to implement those recommendations within a reasonable period of time, it is obliged to enter into negotiations with the complainant in order to determine mutually acceptable compensation. If these negotiations fail, the Dispute Settlement Body may authorize the complainant party to suspend concessions or obligations against the other party. Compensation and suspension of concessions are, however, interim solutions until such time when the recommendations of the DSB are implemented by the member concerned WTO: INTRODUCTION TO THE IMPORTANT AGREEMENTS Agreement on Agriculture The negotiations have resulted in four main portions of the Agreement; the Agreement on Agriculture itself; the concessions and commitments Members are to undertake on market access, domestic support and export subsidies; the Agreement on Sanitary and Phytosanitary Measures; and the Ministerial Decision concerning Least-Developed and Net Food-Importing Developing countries. Overall, the results of the negotiations provide a framework for the long-term reform of agricultural trade and domestic policies over the years to come. It makes a decisive move towards the objective of increased market orientation in agricultural trade. The rules governing agricultural trade are strengthened which will lead to improved predictability and stability for importing and exporting countries alike. Agreement on Sanitary and Phytosanitary Measures This agreement concerns the application of sanitary and phytosanitary measures — in other words food safety and animal and plant health regulations. The agreement recognises that governments have the right to take sanitary and phytosanitary measures but that they should be applied only to the extent necessary to protect human, animal or plant life or health and should not arbitrarily or unjustifiably discriminate between Members where identical or similar conditions prevail. Agreement on Textiles and Clothing The object of this negotiation has been to secure the eventual integration of the textiles and clothing sector — where much of the trade is currently subject to bilateral quotas negotiated under the Multifibre Arrangement (MFA) — into the GATT on the basis of strengthened GATT rules and disciplines. Agreement on Technical Barriers to Trade This agreement will extend and clarify the Agreement on Technical Barriers to Trade reached in the Tokyo Round. It seeks to ensure that technical negotiations and standards, as well as testing and certification procedures, do not create unnecessary obstacles to trade. However, it recognizes that countries have the right to establish protection, at levels they consider appropriate, for example for human, animal or plant life or health or the environment, and should not be prevented from taking measures necessary to ensure those levels of protection are met. The agreement therefore encourages countries to use international standards where these are appropriate, but it does not require them to change their levels of protection as a result of standardization. Agreement on Trade Related Aspects of Investment Measures The agreement recognizes that certain investment measures restrict and distort trade. It provides that no contracting party shall apply any TRIM inconsistent with Articles III (national treatment) and XI (prohibition of quantitative restrictions) of the GATT. To this end, an illustrative list of TRIMs agreed to be inconsistent with these articles is appended to the agreement. The list includes measures which require particular levels of local procurement by an enterprise (“local content requirements”) or which restrict the volume or value of imports such an enterprise can purchase or use to an amount related to the level of products it exports (“trade balancing requirements”). Agreement on Implementation of Article VI (Anti-dumping) Article VI of the GATT provides for the right of contracting parties to apply anti-dumping measures, i.e. measures against imports of a product at an export price below its “normal value” (usually the price of the product in the domestic market of the exporting country) if such dumped imports cause injury to a domestic industry in the territory of the importing contracting party. More detailed rules governing the application of such measures are currently provided in an Anti-dumping Agreement concluded at the end of the Tokyo Round. Negotiations in the Uruguay Round have resulted in a revision of this Agreement which addresses many areas in which the current Agreement lacks precision and detail. Agreement on Preshipment Inspection Preshipment inspection (PSI) is the practice of employing specialized private companies to check shipment details — essentially price, quantity, quality — of goods ordered overseas. Used by governments of developing countries, the purpose is to safeguard national financial interests (prevention of capital flight and commercial fraud as well as customs duty evasion, for instance) and to compensate for inadequacies in administrative infrastructures. Agreement on Import Licensing Procedures The revised agreement strengthens the disciplines on the users of import licensing systems — which, in any event, are much less widely used now than in the past — and increases transparency and predictability. For example, the agreement requires parties to publish sufficient information for traders to know the basis on which licences are granted. It contains strengthened rules for the notification of the institution of import licensing procedures or changes therein. It also offers guidance on the assessment of applications. Agreement on Subsidies and Countervailing Measures Unlike its predecessor, the agreement contains a definition of subsidy and introduces the concept of a “specific” subsidy — for the most part, a subsidy available only to an enterprise or industry or group of enterprises or industries within the jurisdiction of the authority granting the subsidy. Only specific subsidies would be subject to the disciplines set out in the agreement. Agreement on Safeguards Article XIX of the General Agreement allows a GATT member to take a “safeguard” action to protect a specific domestic industry from an unforeseen increase of imports of any product which is causing, or which is likely to cause, serious injury to the industry. General Agreement on Trade in Services The Services Agreement which forms part of the Final Act rests on three pillars. The first is a Framework Agreement containing basic obligations which apply to all member countries. The second concerns national schedules of commitments containing specific further national commitments which will be the subject of a continuing process of liberalization. The third is a number of annexes addressing the special situations of individual services sectors. Part I of the basic agreement defines its scope — specifically, services supplied from the territory of one party to the territory of another; services supplied in the territory of one party to the consumers of any other (for example, tourism); services provided through the presence of service providing entities of one party in the territory of any other (for example, banking); and services provided by nationals of one party in the territory of any other (for example, construction projects or consultancies). Part II sets out general obligations and disciplines. A basic most-favoured-nation (m.f.n.) obligation states that each party “shall accord immediately and unconditionally to services and service providers of any other Party, treatment no less favourable than that it accords to like services and service providers of any other country”. However, it is recognized that m.f.n. treatment may not be possible for every service activity and, therefore, it is envisaged that parties may indicate specific m.f.n. exemptions. Conditions for such exemptions are included as an annex and provide for reviews after five years and a normal limitation of 10 years on their duration. Transparency requirements include publication of all relevant laws and regulations. Provisions to facilitate the increased participation of developing countries in world services trade envisage negotiated commitments on access to technology, improvements in access to distribution channels and information networks and the liberalization of market access in sectors and modes of supply of export interest. The provisions covering economic integration are analogous to those in Article XXIV of GATT, requiring arrangements to have “substantial sectoral coverage” and to “provide for the absence or elimination of substantially all discrimination” between the parties. Part III contains provisions on market access and national treatment which would not be general obligations but would be commitments made in national schedules. Thus, in the case of market access, each party “shall accord services and service providers of other Parties treatment no less favourable than that provided for under the terms, limitations and conditions agreed and specified in its schedule”. The intention of the market-access provision is to progressively eliminate the following types of measures: limitations on numbers of service providers, on the total value of service transactions or on the total number of service operations or people employed. Equally, restrictions on the kind of legal entity or joint venture through which a service is provided or any foreign capital limitations relating to maximum levels of foreign participation are to be progressively eliminated. The first of the annexes to the agreement concerns the movement of labour. It permits parties to negotiate specific commitments applying to the movement of people providing services under the agreement. It requires that people covered by a specific commitment shall be allowed to provide the service in accordance with the terms of the commitment. Nevertheless, the agreement would not apply to measures affecting employment, citizenship, residence or employment on a permanent basis. Agreement on Trade Related Aspects of Intellectual Property Rights, Including Trade in Counterfeit Goods The agreement recognises that widely varying standards in the protection and enforcement of intellectual property rights and the lack of a multilateral framework of principles, rules and disciplines dealing with international trade in counterfeit goods have been a growing source of tension in international economic relations. Rules and disciplines were needed to cope with these tensions. To that end, the agreement addresses the applicability of basic GATT principles and those of relevant international intellectual property agreements; the provision of adequate intellectual property rights; the provision of effective enforcement measures for those rights; multilateral dispute settlement; and transitional arrangements. CHALLENGES AND STRATEGIES: BRACING FOR COMPETITION The Indian companies are already facing the heat of competition in various industries. May it be IT and other sunrise industries like pharmaceuticals and auto parts or old economy ones like textiles and manufacturing? A large part of our GDP comes from agriculture. It is also largest job creating sector in form of direct or indirect jobs. Not only this factors like environmental resolutions and labor reforms are also sensitive to our country. The following paragraph discusses the impact of WTO on various sectors of our industries in the form of challenges posed to it and also about what should be the strategy to counter them and be ready for future trade scenario. Agricultural Sector This sector is the back bone of Indian economy. The importance of this sector can be understood only by the percentage of population that depends on agriculture. As of now we are under balance of payment cover which only makes us liable to bind our tariffs and not to cut subsidies and give market access. We have already bound our tariffs at 100% for agricultural raw produce, 150% for packed foods and 300% for oils. But sooner or later there will be pressure on India to reduce the binding and go for restrictions on subsidies and give more market access. The study on agricultural sector says that India would be benefited in long run but they will be limited to only big farmers and won’t trickle down. It surely means that our effort should be to bring our poor farmers to the level that they can harness the benefits of open market. This is easier said than done. More plans at grass root level with commitment to improve their lot hold the key. In the long run India however needs to look at issues such as food security and rural employment if this is not done. Pharma Sector One of the most shining industries of India is under tremendous pressure under WTO. The advances in this sector would be eroded soon if industry doesn’t gear up for competition. The basic cause for worry is the TRIPS agreement. Under this we are to recognize the product patents and give exclusi...