Page 265 - DECO503_INTERNATIONAL_TRADE_AND_FINANCE_ENGLISH

Unit 24 : Multilateralism and WTO

Notes
2001-present Doha Tariffs on goods, Non-agriculture market
access (NAMA), special and differential 150
treatment, trade facilitation, etc.
Source : WTO.

• GATT rules mainly applied to trade in goods, whereas WTO covers other areas, such as services,
intellectual property, etc.
• GATT had contracting parties, whereas WTO has members.
• GATT was essentially a set of rules of the multilateral treaty with no institutional foundation,
whereas WTO is a permanent institution with its own Secretariat.
• A country could essentially follow domestic legislation even if it violated a provision of the
GATT agreement which is not allowed by the WTO.
• In WTO, almost all the agreements are multilateral in nature involving commitment of the
entire membership, whereas a number of GATT provisions by the 80s were plurilateral and
therefore selective.
• The WTO also covers certain grey areas, such as agriculture, textiles and clothing, not covered
under the GATT.
• The dispute settlement system under the WTO is much more efficient, speedy, and transparent
unlike the GATT system which was highly susceptible to blockages.
Why Should a Country Join the WTO ?

Despite the disciplinary framework for conduct of international trade under the WTO, countries
across the world including the developing countries were in a rush to join the pack. The WTO has
nearly 153 members, accounting for over 97 per cent of world trade. Presently, 34 governments hold
observer status, out of which 31 are actively seeking accession, including large trading nations, such
as Russia and Taiwan. The major reasons for a country to join the WTO are
• Since each country needs to export its goods and services to receive foreign exchange for essential
imports, such as capital goods, technology, fuel, and sometimes even food, it requires access to
foreign markets. But countries require permission for making their goods and services enter foreign
countries. Thus countries need to have bilateral agreements with each other. By joining a
multilateral framework like the WTO, the need to have individual bilateral agreements is obviated
as the member countries are allowed to export and import goods and services among themselves.
• An individual country is unlikely to get a better deal in bilateral agreements than what it gets in
a multilateral framework. It has been observed that developing countries had to commit to a
greater degree to developed countries in bilateral agreements than what is required under the
WTO.
• A country can learn from the experiences of other countries, being part of the community of
countries and influence the decision-making process in the WTO.
• The WTO provides some protection against subjective actions of other countries by way of its
dispute settlement system that works as an in-built mechanism for enforcement of rights and
obligations of member countries.
• It would be odd to remain out of WTO framework for conducting international trade that has
been in existence for about six decades and accounts for over 97 per cent of world trade. It may
even be viewed as suspicious by others.
Functions of WTO
The major function of the WTO is to ensure the flow of international trade as smoothly, predictably,
and freely as possible. This is a multilateral trade organization aimed at evolving a liberalized trade
regime under a rule-based system. The basic functions of WTO are

LOVELY PROFESSIONAL UNIVERSITY 259