Overview
- A multilateral global organisation that sets and administers rules of international trade.
- Established in 1995, replacing the GATT framework.
- Provides a platform for:
- Trade negotiations
- Dispute settlement
- Monitoring national trade policies
- Membership:
- 164 members (including the European Union)
- 23 observer governments
Core Functions
- Acts as a negotiating forum for trade agreements.
- Ensures predictability through binding commitments.
- Provides a rules-based dispute settlement mechanism.
- Promotes transparency and accountability in global trade governance.
Objectives
- Establish and uphold rules governing international trade.
- Promote trade liberalisation by reducing tariff and non-tariff barriers.
- Provide a structured mechanism for resolving trade disputes.
- Enhance transparency in trade-related decision-making.
- Support developing and least-developed countries in integrating into global markets.
- Promote good governance through predictable and rules-based trade administration.
Evolution
International Trade Organisation (ITO)
- Proposed after World War II as part of global economic restructuring.
- Failed due to non-ratification by key countries.
General Agreement on Tariffs and Trade (GATT), 1947
- Came into effect in 1948 with 23 founding countries.
- Focused on reducing tariffs and eliminating quotas.
- Governed global trade in goods from 1948 to 1994.
Uruguay Round (1986–1994)
- Expanded scope to include:
- Services
- Intellectual property
- Stronger dispute settlement
- Led to the creation of WTO.
Establishment of WTO
- Created through the Marrakesh Agreement in April 1994.
- Came into force on 1 January 1995.
- GATT members became WTO members automatically.
India and WTO
- Member of GATT since 1948.
- Founding member of WTO in 1995.
Organisational Structure
Ministerial Conference
- Highest decision-making body.
- Composed of trade ministers of all members.
- Meets every two years.
General Council
- Based in Geneva.
- Conducts routine decision-making.
- Also functions as:
- Dispute Settlement Body
- Trade Policy Review Body
Councils under General Council
- Council for Trade in Goods
- Council for Trade in Services
- Council for TRIPS
Secretariat and Director-General
- Administration handled by Secretariat.
- Director-General appointed for four-year term.
Trade Policy Review Mechanism
- Reviews trade policies of member countries.
- Conducted by the Trade Policy Review Body.
- Enhances transparency and peer accountability.
Dispute Settlement Mechanism
Dispute Settlement Body
- Establishes panels to hear disputes.
- Adopts panel and appellate reports.
- Authorises retaliation in case of non-compliance.
Process
- Consultation phase to seek negotiated solution.
- Panel stage if consultations fail.
- Appeal stage before Appellate Body.
Appellate Body
- Permanent body of seven members.
- Hears appeals on panel decisions.
- Dysfunctional since December 2019 due to lack of quorum after appointment blockages.
Core Principles
Non-Discrimination
Most Favoured Nation
- Any trade benefit granted to one member must be extended to all members.
National Treatment
- Imported goods must be treated no less favourably than domestic goods after entry.
Market Access and Liberalisation
Tariff bindings
- Members commit to maximum tariff ceilings.
Non-tariff barriers
- Restrictions such as quotas discouraged unless justified.
Fair Competition
- Prevents dumping and trade-distorting subsidies.
- Allows anti-dumping and countervailing measures under defined rules.
Special and Differential Treatment
- Longer implementation periods for developing countries.
- Preferential market access.
- Technical assistance and capacity-building support.
Present Challenges
- Appellate Body paralysis weakening dispute enforcement.
- Rising protectionism and trade wars.
- Disagreements over agriculture subsidies and digital trade.
- Concerns from developing countries about unequal benefits.
Significance
- Ensures predictability in international trade.
- Reduces unilateral trade retaliation.
- Provides smaller countries a structured platform in global trade governance.
- Supports global economic stability and growth.
