Economic Environment of Business_8

What is The WTO?

The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations.
The goal is to help producers of goods & services, exporters & importers conduct their business.


History of The (WTO)

In 1947, 23 countries including India signed the General Agreement on Tariff & Trade (GATT) was created to reduce global depression & liberalize & regulate the world trade, by reducing tariff barriers.
GATT was replaced by WTO in 1995.


Structure of the (WTO)

The WTO has 149 members, accounting for over 97% of the world trade.
Membership decisions are made by the entire membership.
The WTO top level decision making body is the “Ministerial Conference” which meets at least once every two years.
Below this is the “General council” which meets several times a year in the Geneva headquarters.


Principle Objectives of WTO

Trade without Discrimination
Settlement of Disputes
Raising standard of living
Optimum use of world’s resources
Growth of Least developing Countries(LDC’s)


Functions of the WTO

It looks after the administration of 30 agreements (30,000 pages) plus number of other agreements entered into with member nations.
Regularly examining the foreign trade policies of the member nations,to see that such policies are linked with WTO’s guidelines.
The WTO dispute settlement body adjudicate a trade dispute, that cannot be solved through bilateral talks between member countries.
It collects information in respect of export & import trade, various trade measures & other trade statistics of other nations.
It keeps watch on the development in world economy and provide consultancy services to its member nations.
WTO is the forum where member nations continuously negotiates the exchange of trade concessions.


Achievements of WTO

Information Technology Agreement (ITA) in December 1996, at Singapore Meeting.
WTO members sign an agreement on financial services. This aims to eliminate the barriers to expansion of the banking, insurance, & security sector.
Multilateral Agreement on Investment (MAI) at Singapore Meeting.


Challenges of WTO on Indian Economy

Tariff Barrier
Quantative Restrictions (Quotas)
Agricultural Items
Service Sectors
Trade Related Intellectual Property Rights (TRIPS)


Impacts of WTO on Indian Economy

A) Positive Impacts
1.Growth in Exports
2.Growth in Foreign Investments
3.Textiles & Clothing's
4.Multilateral Rules & Disciplines

B) Negative Impacts
1.Impacts of TRIPS
2.Impacts of TRIMS
3.General Agreement on trade & Service (GATS)
4.Impact on Indian Economy


Most Favoured Nations (MFN) Clause

According to this clause a member nations of the WTO must accord the same preferential treatment to other WTO members which it gives to any other member nation.
The basic principle of WTO is the non discrimination. Countries belong to WTO accept the so called MFN Clause.


Exemptions to MFN Clause

1.Commonwealth Nations (Grand father Clause)
2.The Custom Unions & Free Trade Area Preferences were allowed to exist., i.e. free movement of all commodities & services & also factors of production i.e. labour & capital between member countries. For E.g. European Union (Trade Block)