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International Marketing

Notes policy-making. Another priority of the WTO is the assistance of developing, least-developed
and low-income countries in transition to adjust to WTO rules and disciplines through technical
cooperation and training. The WTO is also a centre of economic research and analysis: regular
assessments of the global trade picture in its annual publications and research reports on specific
topics are produced by the organization. Finally, the WTO cooperates closely with the two other
components of the Bretton Woods system, the IMF and the World Bank.

Principles of the Trading System

It is concerned with setting the rules of the trade policy games. Five principles are of particular
importance in understanding both the pre-1994 GATT and the WTO:
1. Non-discrimination: It has two major components: the Most Favoured Nation (MFN) rule
and the national treatment policy. Both are embedded in the main WTO rules on goods,
services, and intellectual property, but their precise scope and nature differ across these
areas. The MFN rule requires that a WTO member must apply the same conditions on all
trade with other WTO members, i.e. a WTO member has to grant the most favourable
conditions under which it allows trade in a certain product type to all other WTO members.
“Grant someone a special favour and you have to do the same for all other WTO members.”
National treatment means that imported and locally-produced goods should be treated
equally (at least after the foreign goods have entered the market) and was introduced to
tackle non-tariff barriers to trade (e.g. technical standards, security standards et al.
discriminating against imported goods).
2. Reciprocity: It reflects both a desire to limit the scope of free-riding that may arise because
of the MFN rule, and a desire to obtain better access to foreign markets. A related point is
that for a nation to negotiate, it is necessary that the gain from doing so be greater than the
gain available from unilateral liberalization; reciprocal concessions intend to ensure that
such gains will materialize.
3. Binding and enforceable commitments: The tariff commitments made by WTO members
in a multilateral trade negotiation and on accession are enumerated in a schedule (list) of
concessions. These schedules establish “ceiling bindings”: a country can change its bindings,
but only after negotiating with its trading partners, which could mean compensating
them for loss of trade. If satisfaction is not obtained, the complaining country may invoke
the WTO dispute settlement procedures.
4. Transparency: The WTO members are required to publish their trade regulations, to
maintain institutions allowing for the review of administrative decisions affecting trade,
to respond to requests for information by other members, and to notify changes in trade
policies to the WTO. These internal transparency requirements are supplemented and
facilitated by periodic country-specific reports (trade policy reviews) through the Trade
Policy Review Mechanism (TPRM). The WTO system tries also to improve predictability
and stability, discouraging the use of quotas and other measures used to set limits on
quantities of imports.
5. Safety valves: In specific circumstances, governments are able to restrict trade. There are
three types of provisions in this direction: articles allowing for the use of trade measures
to attain non-economical objectives; articles aimed at ensuring “fair competition”; and
provisions permitting intervention in trade for economic reasons.

Did u know? The WTO establishes a framework for trade policies; it does not define or
specify outcomes.

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