Globalization

Topics included

Introduction to GATT and WTO Achievements of GATT WTO over GATT WTO Powers Role of WTO India’s Role in WTO

Introduction to GATT

(GATT) is a multilateral agreement regulating international trade.

Its purpose is the "substantial reduction of tariffs and other trade

barriers and the elimination of preferences, on a reciprocal and

mutually advantageous basis. It was negotiated during the UN

Conference on Trade and Employment and was the outcome of

the failure of negotiating governments to create the International

Trade Organization (ITO). GATT was signed in 1947 and lasted

until 1993, when it was replaced by the World Trade Organization

in 1995. The original GATT text (GATT 1947) is still in effect

under the WTO framework, subject to the modifications of GATT

1994

Major Provisions of GATT

Tariff Quantitative Restrictions Developing Countries

Achievements of GATT

GATT has enjoyed a membership of over 100 countries and

generated about 85-90% of world trade.

(i) trade liberalization in industrial products (Kennedy Round)

(ii) Adopted codes on NTBs (Tokyo Round)

(iii) No world wars since 1948 (Increased trade promotes

world peace)

(iv) Replaced by WTO on January 1, 1995.

WTO OVER GATT It came into existence on 1st January 1995.

The original intention was to create a third institution to handle the trade

side of the international economic cooperation, joining the two “Bretton

Woods” institutions, the International Monetary Fund and the World Bank.

All was not going well under the GATT and with the world trade

becoming more and more complex, GATT was not able to deal with it. For

instance, in agriculture, loopholes in the multilateral system were heavily

exploited, and efforts at liberalizing agricultural trade met with little

success.

In the textiles and clothing sector, an exception to GATT’s normal

disciplines was negotiated in the 1960s and early 1970s, leading to

the Multifibre Arrangement. Even GATT’s dispute settlement

systems were causing concern.

The WTO framework ensures a “single undertaking approach” to

the results of the Uruguay Round — thus, membership in the WTO

entails accepting all the results of the Round without exception

WTO POWERS

WTO covers a much broader purview, including subsidies, intellectual

property, food safety and other policies that were once solely the subject

of national governments.

The WTO also has strong dispute settlement mechanisms. As under

GATT, panels weigh trade disputes, but these panels have to adhere to a

strict time schedule.

Role of WTO

Trade negotiations Implementation and monitoring Dispute settlement Building trade capacity Outreach

India’s role in WTO

Founder member - India is a founder member of the General Agreement on Tariffs and

Trade (GATT) 1947 and its successor, the World Trade Organization (WTO), which came into

effect on 1.1.95 after the conclusion of the Uruguay Round (UR) of Multilateral Trade

Negotiations.

Stability and Predictability - 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 for itself and the 149 other nations which

now comprise the WTO.

MFN - India also automatically avails of MFN and national treatment for its exports to all

WTO members. According to the WTO Secretariat Report, along with the policy statement by

the Government of India, India is expected to snatch most of the business deals that are

presently catering the developed nations which includes major service based industries like

telecom, financial services, infrastructure services such as transport and power.

The increase in availability and reduction in tariffs has prompted many

developed nations to go for business with India especially in IT industry.

If the trend continues then by 2025, India is expected to cater to the

software and services demands of major giants of the business world.

Analyzing the present relationship with the promising economic growth of

India, one can be sure that India is going to enjoy a very candid and bright

relationship with WTO and associated member nations by 2025

“India has also played an important part in the

effective formulation of major trade policies”