World Trade Organization [WTO]

  • The World Trade Organization (WTO) is the only international organization that deals with the global rules of trade between nations. The WTO is built on WTO agreements signed by the majority of the world’s trading nations; its main function is to help producers of goods and services, exporters and importers better protect and manage their businesses.
  • The WTO is essentially a mediation entity that helps with the international rules of trade between nations; however, the WTO has become a driving force behind the institution of globalization and has had both positive and potentially adverse effects on the world. The WTO’s efforts have positively increased trade expansion globally, but as a side effect, it has negatively impacted local communities and human rights.

Objectives of WTO:

  1. To improve the standard of living of people in the member countries.
  2. To ensure full employment and broad increase in effective demand.
  3. To enlarge production and trade of goods.
  4. To increase the trade of services.
  5. To ensure optimum utilization of world resources.
  6. To protect the environment.
  7. To accept the concept of sustainable development.

Origin of WTO*(For Information only) and its Functions:

  • The origin of WTO can be traced back into the days of post-world war II era. Soon after the world war various countries came together to sought means to promote and facilitate international trade.  As a result General Agreement on Trade and Tariffs was signed by 23 countries in 1947.
  • In the year 1986, eighth and the final round for negotiations regarding the GATT was held in Uruguay, the round lasted for 8 years and resulted in signing of The Final Act in April, 1994 by the member nations and this made the way for founding up of World Trade Organisation which was set up formally on January 1, 1995.
  • Unlike GATT which was merely a legal arrangement and not a permanent organisation, WTO was incepted as a new permanent international organisation and was designed in the way to play the role of a watchdog in the sphere of trade of goods, services, intellectual property rights etc.

Functions of WTO: The functions of WTO are specified in article III which are laid as follows.

  1. The WTO shall facilitate the implementation, administration and operation, and further the objectives, of this Agreement and of the Multilateral Trade Agreements, and shall also provide the framework for the implementation, administration and operation of the Plurilateral Trade Agreements.
  2. The WTO shall provide the forum for negotiations among its Members concerning their multilateral trade relations in matters dealt with under the agreements in the Annexes to this Agreement. The WTO may also provide a forum for further negotiations among its Members concerning their multilateral trade relations, and a framework for the implementation of the results of such negotiations, as may be decided by the Ministerial Conference.
  3. The WTO shall administer the Understanding on Rules and Procedures Governing the Settlement of Disputes.
  4. The WTO shall administer the Trade Policy Review Mechanism.
  5. With a view to achieving greater coherence in global economic policy-making, the WTO shall cooperate, as appropriate, with the International Monetary Fund and with the International Bank for Reconstruction and Development and its affiliated agencies.

WTO Agreements


  1. Agreement on Agriculture: The agreement provides a framework for long term reforms of agro-trade and domestic policies for  the years to come, with an objective of introducing increased market orientation in Agricultural trade. The members have to transform their non-tariff barriers like quotas into tariff measures. The tariffs resulting out from this transformation and that from other tariffs on agro-products needs to be reduced by 36% by developed countries and by 24 % by developing ones. Reductions meant to be undertaken within 6 years for developed countries and 10 years for developing countries. Least developed countries were not required to make any reductions.
  2. Agreement on trade in Textiles and Clothing:  Provided for phasing out the import quotas on textiles and clothing in force under Multi-Fibre Arrangement, over the span of 10 years. As a result of this agreement, quotas on textiles and clothing have now been abolished.
  3. Agreement on Market Access: The member nations will cut tariffs on industrial and farm goods by an average of about 37%. The USA and the EU will cut tariff between them by one-half.
  4. Agreement on TRIMs: The agreement on Trade Related Investment Measures calls for introducing national treatment of Foreign investments and removal of quantitative restrictions.
  5. Agreement on TRIPs: These pertains to patents and copyrights. Earlier Process Patents were granted for food, medicines, drugs and chemical products whereas now TRIPs agreements provides for granting product patents for all the above three areas. Protection: 20 years for Patents and 50 years for copyright.
  6. Agreement on Services: The trade in service sector like banking, insurance, travel and transportation etc. was brought within the scope of negotiations in the Uruguay Round for the first time. It provides a multilateral framework for principles and services which should govern trade in services under the conditions of transparency and progressive liberalization. Commitment for Liberalization in general terms.
  7. Disputes Settlement Body: Settlement of disputes under GATT was a never ending process. There existed a huge scope for procedural delays, objections could be raised at any and every stage of settlement process and penal reports could be rejected by the offending parties. The body set up under WTO seeks to Plug these loopholes . It has now been made mandatory to settle a dispute within 18 months. The findings of the body will be binding on all the parties.

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