2. GATT
General Agreement on Tariffs and Trade (GATT) was a legal agreement between many
countries, whose overall purpose was to promote international trade by reducing tariff
and non-tariff restrictions on imports imposed by member-nations.
It was established in 1947. Initially 23 nations signed the original agreement of GATT.
In 1994, its membership had increased to 124.
On 1st January, 1995 a new organization named as World Trade Organization (WTO) was
formed. It took over GATT.
3. Objectives
1. Expansion of international trade,
2. Increase level of production by ensuring full employment in the member countries.
3. Development and full utilization of world’s resources
4. Raising standard of living of the world community as a whole.
5. To promote multilateral trade, this means trade among many nations
4. Principles of GATT
Non-discrimination
Prohibition of Quantitative Restrictions
Consultation
5. Working of GATT
The first seven rounds of GATT were aimed at promoting international trade in goods but
the eighth round of GATT include many new areas :
1) Trade In Services.
2) Trade Related Intellectual Property Rights. (TRIPS)
3) Trade Related Investment Measures (TRIMS)
6. Trade in Services
Dunkel Draft provides for free trade related to services like banking, insurance, transport,
communication, tourism etc. It provides for free flow of services among the member
nations.
Trade related Intellectual Property Rights
TRIPs are related to protecting intellectual property rights through patents, copyright
rights, trademarks etc. According to this agreement, the person who has invented some
new product can get his patent registered for a specified period of time. Any person who
uses such patents will have to pay royalty to the patent-holder.
Trade related Investment Measures
TRIMs provide for abolition of all restrictions on foreign investment. Member countries
are required to offer all such facilities to the foreign investors as are available to their
domestic investors. Foreign investment should be treated at par with domestic
investment. This investment is expected to raise the level of global output and
employment.
7. WTO
WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by
123 nations on 15 April 1994, replacing the General Agreement on Tariffs and
Trade(GATT),
The World Trade Organization is a multi-lateral organization which facilitates the free flow
of goods and services across the world and encourages fair trade among nations.
8. Features of WTO
It is an international organization to promote multilateral trade.
It has replaced GATT.
It promotes free trade by removing tariff and non tariff barriers in international trade.
It has fixed set of rules and regulations and it has a legal status. Its rules and regulations
are mutually designed and agreed upon by member nations.
It includes trade in goods, trade in services, protection of intellectual property rights,
foreign investment, etc.
Unlike the IMF and the World Bank, there is no weighted voting, but all the WTO
members have equal rights.
9. Objectives of WTO
The primary aim of WTO is to implement the new world trade agreements.
To ensure the reduction of tariffs and other barriers to trade.
To eliminate discriminatory treatment in international trade relations.
To facilitate higher standards of living, full employment, a growing volume of real income
and effective demand, and an increase in production and trade in goods and services of the
member nations.
To facilitate the optimal use of the world’s resources for sustainable development.
To enhance competitiveness among all trading partners so as to benefit customers
10. Functions of the WTO
Laying down code of conduct aiming at reducing tariff and non-tariff barriers in
international trade.
Implementing WTO agreements and administering the international trade.
Cooperating with IMF and World Bank and its associates for establishing coordination in
Global Trade Policy Making.
Reviewing trade related economic policies of member countries with the help of its Trade
Policy Review Body (TPRB).
Providing technical assistance and guidance related to management of foreign trade and
fiscal policy to its member nations.
12. WTO Agreements
Trade in Agriculture
• Reduction in Domestic subsidies
• Reduction in export subsidies
• Improvement in market access
• Public Distribution System
Trade in Textile and Clothing
• Elimination of Multi-Fibre Arrangement
• Reduction in Tariff on Textiles and Clothing
• Safeguard Mechanism
13. Trade related Intellectual Property Rights(TRIPs)
Trade related Investment Measures(TRIMs)
General Agreement On Trade in Services(GATS)
Dispute Settlement
For settlement of disputes relating to international trade, WTO has set up Dispute
Settlement Body(DBS). It consults parties under dispute and Director General of
WTO acts as mediator for the settlement of dispute.
14. Advantages of WTO
Increase in flow of foreign investment
Increase in Agricultural Exports
Improvement in services
Benefits for Clothing and Textiles Industry
Multilateral Rules And Disciplines
Increase in Foreign Trade
15. Disadvantages of WTO
Loss to domestic industries
Effect on prices
Loss to regional groupings
Increase in unemployment
Disadvantage to service sector
16. Difference between GATT and WTO
Basis for Comparison GATT WTO
Meaning GATT can be described as a set of rules,
multilateral trade agreement that came into
force, to encourage international trade and
remove cross-country trade barriers.
WTO is an international organization that
came into existence to oversee and liberalize
trade between countries.
Institution It does not have any institutional existence,
but have a small secretariat.
It has permanent institution along with a
secretariat.
Participant nations Contracting parties Members
Commitments Provisional Full and Permanent
Application The rules of GATT are only for trade in
goods.
The rules of WTO include services and
aspects of intellectual property along with
the goods.
Domestic Legislation Allowed to continue Not allowed to continue
Dispute Settlement System Slow and ineffective Fast and effective
17.
18. The main purpose of the implementation of GATT was to increase cross-country trade in
the world, so as to reinforce economic soundness, after the Second World War. It is the
foundation of WTO that made open trade between nations but also maintained some
barriers for the benefit of all.
The multilateral aspect of India's WTO commitments is regarding trade in goods and
services, trade-related investment measures, and intellectual property rights.
It is expected that resources would be allocated in India to the labor-intensive sectors such
as textiles, clothing, leather and leather products, and food, beverages, and tobacco. These
sectors would also experience growth in output and exports. Real returns to both labor and
capital would increase in the economy.
