World Trade Organisation (WTO)

WTO logo.

The World Trade Organisation is an intergovernmental organisation that is concerned with the regulation of international trade in goods, services and intellectual property between nations. It is headquartered in Geneva, Switzerland.

WTO commenced in 1995 under the 1994 Marrakesh Agreement, replacing the General Agreement on Tariffs and Trade (GATT).
GATT was signed in 1947 to promote international trade, and was the outcome of negotiating governments to create the proposed International Trade Organisation.

  • Structure of WTO
    • decisions are taken by the membership as a whole (consensus) and by negotiations among members.
    • Ministerial Conference – highest organ of WTO, meets every two years.
    • General Council – real engine of WTO, works on guidance of Ministerial Conference
  • Powers
    • WTO is a deliberative organisation and provides platform to member countries to negotiate trade deals. It doesn’t have any power to enforce the rules. Disputes between countries are settled with mutual negotiations wherein WTO acts as a mediator.

WTO Agreements:

  • Agreement on Agriculture 1994
    • Domestic Subsidies are categorised into following types with varying restrictions on them:
      • Green box – allowed without limits
        • cause minimal distortion in trade; includes direct income support for farmers that is not linked to (is decoupled from) current production levels or prices
      • Amber box – allowed within limits
        • are trade distorting; includes price support and subsidies directly linked to production quantity
      • Blue box – allowed without limits on spending
        • any support which usually would be in amber box, is put in blue box if the support also requires farmers to limit production
      • There is no de jure red box (prohibited) in agriculture agreement, though amber box subsidies above limits are prohibited (in effect same as red box).
  • SPS 1995 – Sanitary and Phyto-Sanitary Agreement 
    • protects member governments’ rights to regulate their own food safety, animal and plant health issues.
    • developed countries have used it to erect non-tariff barriers which hinders farm exports from developing countries, citing quality concerns such as those related to pesticide residue in crops; while developing countries have been unable to put such restrictions on imports from developed countries due to their lack of quality check and assaying facilities at the import terminals.
  • TRIPS 1994 – agreement on Trade related Aspects of Intellectual Property Rights
  • GATS 1995 – General Agreement on Trade in Services
    • Four modes of supply – Mode 4 involves movement of persons for supplying service – like IT professionals temporarily moving to another country
  • Agreement on Technical Barriers to Trade 1994
  • Bali Package 2013

Doha Development Round (2002)

  • is the latest trade negotiation round of the WTO to lower trade barriers around the world to facilitate development
  • Doha Development Agenda (DDA): primary purpose was to improve trading prospects for developing countries
  • negotiations broke down in 2008 over disagreements concerning agriculture, industrial tariffs and non-tariff barriers between developed and developing countries.
    • primarily over the issue of huge trade-distorting subsidies given to farmers by the rich countries
  • future of this round remains uncertain

Bali Package 2013

  • an agreement resulting from the Bali Ministerial Conference (2013). The package forms part of the Doha Development Round.
  • the first WTO agreement approved by all its members
  • addressed bureaucratic barriers to commerce – a small part of the Doha Round agenda (development agenda)
  • Trade Facilitation Agreement (TFA)
    • to simplify customs regulations for smooth cross-border movement of goods
    • It came into force in 2017.
    • India has ratified it in 2016.
      • Consequent to the ratification, India has set up National Committee on Trade Facilitation (NCTF) chaired by the cabinet secretary, housed in CBEC.
    • India has also proposed a Trade Facilitation Agreement for Services (TFS) on the lines of TFA.
  • Food Security: A ‘peace clause’ was signed which protects India’s food procurement programmes against penal action from WTO members in case subsidy ceilings are breached.
    • the clause is restricted to programmes running in 2013.
    • The peace clause is available till a permanent solution to the issue of food-grain procurement is found.

India’s issues with WTO: – 

  • Food Security issue or public food stockholding issue:
    • WTO rules see Indian government’s food grain procurement programs as unfair as farmers are often paid above market prices for their harvests – thus distorting the trade against foreign producers.
    • Also, food distribution programs, as per which  food-grains are distributed through fair price shops at below market prices to poor people, are seen as trade distorting.
    • India and other developing countries proposed to amend the rules so government food stockpiling would not count toward Aggregate Measure of Support as long as it is aimed at helping poor farmers – even if it involves buying food at above-market prices.

Other issues:

  • fisheries subsidies: 
    • India feels that developing countries possessing very low fishing capacity need to retain policy space to promote and create such capacity.
      • Inland fisheries is rapidly growing and is being promoted by the government to help farmers diversify and increase their income
    • India stresses the importance of suitable special and differential treatment provisions and the need to make a clear distinction between large scale commercial fishing and traditional fishing on which millions of Indian fishermen are dependent on to make a livelihood.
  • Solar Power Dispute (with US)
    • National Solar Programme (JNNSM)
      • local content requirements favour domestic firms
      • In 2016, Dispute Settlement Body (DSB) had ruled in favour of US and considered compulsory domestic content requirement as discriminatory against foreign producers. 
      • DSB to set up a panel to decide whether India has complied with its ruling. (India asserts that it has complied)
  • Merchandise Exports from India Scheme – issues
    • US challenged this scheme. Developed countries have raised issues that as India has crossed the USD 1000 threshold of the per capita gross national income (GNI) for three consecutive year, it should phase out export subsidies – as per SCM (Subsidies and Countervailing Measures) Agreement.
    • India’s stand: WTO rules provides for eight years period for graduating countries (cross 1000 USD mark) to phase out their export subsidies. 
      • India’s stand is based on the 8 year phaseout that was offered to above 1000$ GNI countries at the time of implementation of Subsidies and Countervailing Measures Agreement in 1994-95. Two decades have passed since then and India’s stand might not be feasible.
    • Experts say: India would have to phase out some of its export incentives. It is anticipated that there will be no immediate adverse impact on our foreign trade.

Updates:

  • In the WTO meet 2017 in Buenos Aires, India is eyeing a permanent solution to the issue of food procurement. India is unlikely to accept a solution inferior to the already existing permanent peace clause. The biannual meet ended in stalemate without a joint declaration.
  • India wants developed world (especially US) to trim their massive trade-distorting farm subsidies without putting the onus of a reduction of such subsidies on developing nations.
  • March 2019: After Brazil and Australia, central American nation Guatemala dragged India into the WTO’s dispute settlement mechanism alleging that India’s sugar subsidies to farmers are inconsistent with global trade rules.
  • April 2019: European Union, China and some other countries have sought consultations, the first step of the dispute settlement process at WTO, over India’s allegedly high import tariffs on ICT products such as mobile phones. If the consultations fail to reach an agreement, the matter can be taken up by WTO’s Dispute Settlement Body which gives the final, but non-binding ruling.

More related information:

Special Safeguard Mechanism (SSM) – allows developing countries to raise tariffs temporarily to deal with import surges and price fall – in agriculture sector.

WTO rules cannot be enforced, disputes can be settled by negotiations.

TiVA – Trade in Value Added – database launched by WTO and OECD. covering 61 countries.


TiSA – Trade in Services Agreement

  • A proposed trade treaty between 23 parties including EU and US.
  • Aims at liberalising worldwide trade in services. based on WTO’s General Agreement on Trade in Services (GATS).
  • Criticism – secret negotiations; and ban on government mandates to access software source code.

Non-agricultural Market Access (NAMA) negotiations calls for a reduction or elimination in tariffs, particularly on exportable goods of interest to developing countries.

Compulsory License – 

  • Compulsory License provides that an individual or a company can use other’s intellectual property without the consent of the owner of the intellectual property, if conditions arise in which he is unable to come up with a reasonable agreement in reasonable time, or it is necessary in public interest, etc. It can be issued by a government. India issued its first compulsory license in 2012 to a local drug manufacturer against a Bayer patent.
  • Berne Convention for the Protection of Literary and Artistic Works 1886 is the legal basis for this.
  • TRIPS 1995 also sets out specific conditions that shall be followed if a compulsory license is issued.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s