World Trade Organization (WTO): Roles, Functions, Structure, WTO UPSC

What is WTO?

The World Trade Organization, also known as WTO, is a Global organization that deals directly with making rules and regulations among the Nations with respect to trading. It was constituted on the 1st of January 1995. India also joined the WTO in 1995 and is a founding member of the World Trade Organization. WTO is headquartered in Geneva, Switzerland, and it consists of 164 countries, where 160 are United Nations countries, along with the EU, Hong Kong, Macau, and Taiwan. Apart from this, WTO also acts as a forum that negotiates the trading agreement and settles down trading disputes among countries by providing support and a full feeling of the needs of developing countries

WTO UPSC Notes

The main and prime focus of the World Trade Organization is to provide benefits to all the traders in the world. WTO has a body called the Ministerial Conference, which is the highest decision-making body. This conference consists of all the member states and holds a meeting twice a year. The Ministerial Conference is the WTO’s top decision-making body and usually meets every two years. All members of the WTO are involved in the Ministerial Conference, and they can take decisions on all matters covered under any multilateral trade agreements.

Read: World Trade Organization and India

History of World Trade Organization (WTO)

The World Trade Organization was established on 1st January 1995, but its working dates back to about 50 years ago. Before the WTO, GATT was in existence in 1948, which was replaced by it.

• According to the General Agreement, a body named GATT(General Agreement on Tariff and Trade) was formed, which underwent evolution over the years of rounds of negotiations.
• This GATT witnessed its last conference in 1994, which started in 1986. This last round was called the Uruguay Round.
• A year later, the WTO was formed in 1995. Where the GATT, only dealt with trading, the World Trade Organisation focused on goods trading along with services and intellectual properties.

Why WTO replaced GATT?

There are various reasons why WTP replaced GATT (General Agreement of Tariffs and Trade ), an international trade agreement signed in 1947) with the World Trade Organization:

• In addition to legal problems, a number of factors contributed to the failure of GATT including the legal problems, specifically in the agriculture and textile areas.
• For example, in the GATT framework, the United States could not convince China and Japan to open up their markets to our goods and services.
• Furthermore, the GATT excluded the services and intellectual property rights, and there was no International mechanism to resolve such trade-related disputes.
• Therefore, GATT started to face very serious problems and eventually converted to the World Trade Organization. Hence it can also be said that the WTO is a new form of the existing GATT that exhausted its purpose and was not capable enough to intermediate the Global economic consequences and achieve the industrial interest of countries

Governance Structure of WTO

The Governance of WTO is composed of many higher delegations. Authorities include the representatives of all the WTO country members who meet at least after every 2 years and take major decisions related to the multilateral trading system and make agreements. The governance structure of WTO is-

• The Ministerial Council
• General Council
• Goods Council
• Intellectual Property Council
• Services Council
• The work between the ministerial conferences is handled by three bodies, namely the General Council, Disputes Settlement Body, and Trade Policy Review Body. The General Council is headed by David Walker of New Zealand.
• The Council for Trade in Goods oversees about 11 committees, and each one of them has separate responsibilities. All the committees consist of the existing WTO members only. This is also led by the chairman.
• The Council on Trade-Related Aspects of Intellectual Property Rights promotes trade aspects of the same. The news and official records regarding the TRIPS Council and WTO collaboration with other international organizations on intellectual property at the World Trade Organization are provided by him.
• The Council for Trade Services is directed by the General Council which Oversees the operations of general agreements on trade in services means GATS.

Ministerial Conference of World Trade Organization(WTO)

WTO has held its 12th Ministerial Conference at its Headquarters in Geneva, Switzerland. It was held between 12-17 June 2022. This Conference was attended by ministers present from all over the world(member countries) and discussed the functioning of this multilateral trading system and taking actions regarding the future work of the World Trade Organization. This conference was chaired by Timur Suleimenov, who is the Deputy Chief of staff of the Kazakhstan President. Earlier this conference was supposed to be held in 2020 but got postponed due to the covid-19 but it concluded successfully on 17 June 2022.

Read: Difference Between Bilateral and Multilateral Trade

Objectives of the WTO

WTO aims to reduce barriers to trade and promote economic growth and development among its member countries. Let’s explore the major objectives of WTO below.

• To limit the trading barriers by negotiating. This results in a reduction in the prices of goods and services, which in turn results in a reduction in the cost of living.
• Stimulating economic growth and development, and employment opportunities
• Limit the cost of international business activities.
• To promote the concept of good governance.
• To reduce the trade disputes among the countries.
• Collaborating with leading financial institutions to boost economic management.

Agreements of the World Trade Organization

The WTO agreements are designed to promote free and fair trade among member countries by reducing barriers to trade, protecting intellectual property rights, and ensuring that trade policies are transparent and predictable. The major agreements under the WTO are:

• The goods, services, and intellectual property will be under the control of the WTO.
• They will resolve the issues related to the trading.
• They advise and compel countries to enact their own trade regulations and notify the WTO.
• It has agreed to over 60 agreements that are primarily legal texts.
• A country has to sign and ratify the accords of the WTO before joining it.

Functions of WTO

The functions of the WTO are numerous and critical in facilitating a fair and open international trade system.  The major functions of WTO include the following.

• It regulates the laws related to trade agreements.
• Organize the conferences for trade negotiations.
• Sort out and resolve the issues related to trading.
• examines trade-related policies
• Consult and cooperate with economic organizations.

Principles of World Trade Organization

WTO has 5 principles that are designed to promote free and open trade among member countries, while also ensuring that trade is conducted in a manner that benefits all parties involved. The following are the principles of WTO:

Trade Without Discrimination

As per the WTO agreement, no countries can discriminate against each other or grant some special favors to any country. The WTO keeps all the members on the same page. Also, the product imported and locally made goods should be given equal treatment at least even when those goods enter the foreign trade market.

Free Trade Through Negotiations

There can be many barriers to free trade, like duties or tariffs, Bans, or Quotas which may affect effective trading. WTO also keeps on discussing such issues over time to reduce the fitness in business and marketing and make it relaxed and free trade.

Predictability Through Binding and Transparency

Whenever any country opens a market for services or goods gets bound under the World Trade Organization. The terrace binding for goods is mostly the ceilings on the rates of custom tariffs. At times some countries track imports below the bound rate, and this problem is most common in developing countries.

Promoting Fair Competition

In the fields of agriculture, intellectual properties, and services provided, there are many agreements of WTO that provide fair competition. As a result of it, the government procurement agreement competition rule applied to more than thousands of governments in all countries.

Encouraging Development and Economic Reform

Development is facilitated by the WTO system. In contrast to this, the developing countries name time and flexibility as they take a slow time to implement the agreement made by the WTO systems. In addition to these agreements, these agreements inherit the GATTs former provisions that provide special assistance and trade concessions.

Trade Agreements of WTO

WTO has a total of 60 agreements and decisions 550 pages. These agreements are the result of Uruguay round negotiations which were signed at the Marrakesh Ministerial meeting in 1994.

• After that, many legal texts related to Information Technology agreements and accession protocols have been included in the WTO legal texts.
• Some new negotiations that included negotiation on agriculture services and Intellectual Property Rights topics were declared in the Doha Ministerial declaration after November 2001.

Goals of World Trade Organization

The primary goal of WTO is to give an open and free trade space to international traders where they can do trading without any obstruction.

• It makes and implements the rules related to international trading.
• It creates a venue for liberalization negotiation and trade monitoring.
• It makes decisions that are more transparent and fair with all the member countries.
• It also works with other important economic Institutions and works actively for Global economic management.
• It opens the ground and provides a platform to the countries that can take advantage of WTO for the global Trading system.

WTO and India

India has been a member of the former GATT since 1948 and an active member of the World Trade Organizationsince 1995. Being a developing nation, India has contributed much in the trading field to WTO, especially by raising its own concerns as well as its fellow developing nations.

• At the 2001 conference in Doha, Qatar, India was seen as the most outspoken advocate among all the countries. India has signed many agreements with the WTO, whose implications can be seen in the Indian economy. These agreements are-
• Reducing tariff and non-tariff barriers- In this agreement, the total reduction of tariffs on manufactured and finished goods.
• TRIMS- It stands for Trade-Related Investments Measures. This measure restricts the host country from being Biased toward internal trade and unbiased toward foreign trade in their countries.
• TRIPS- It stands for Trade-Related Intellectual Property Rights. It aims to recognize and protect the legal rights of the original creator of intangibles.
• AOA- It means Agreement on Agriculture, which deals with the reduction of subsidies and giving market access to agricultural products.

India and WTO – latest Updates

Following are the latest updations in the meeting between WTO and India:

• Banning of Chinese apps
• Peace Clause-related issues
• ICT tariffs case
• Subsidies on fisheries.

Significance of World Trade Organization

The existence of the WTO is of great significance to all global trading systems. It significantly enforces the rules and regulations for trading. WTO’s primary function is to ensure that trade flows as smoothly, predictably, and freely as possible, while also providing a forum for its members to negotiate and resolve trade disputes Because of the WTO, the import and export business has seen a great level of transparency and smoothness. This allows the consumer to have a vast variety of topics.

WTO UPSC

For candidates preparing for the UPSC exam, understanding the role and importance of the WTO is crucial as questions related to international relations and its governance are often asked in the exam. Knowledge of WTO rules and regulations is necessary to comprehend the impact of international trade on the domestic economy and to formulate policies that align with global trade norms. Additionally, the UPSC exam expects aspirants to have a comprehensive understanding of contemporary issues, and the WTO’s role in addressing emerging challenges like digital trade, and public health, among others. To prepare for this topic effectively it is recommended to follow the best UPSC International Relations Books along with notes.

WTO UPSC Questions

Question: When was the WTO established? a) 1944 b) 1954 c) 1964 d) 1995

Answer: d) 1995

Question: How many member countries are there in the WTO? a) 50 b) 100 c) 164 d) 200

Answer: c) 164

Question: What is the main function of the WTO? a) To promote free trade and economic growth b) To regulate international finance and banking c) To provide humanitarian aid to developing countries d) To provide security and defense cooperation among member countries

Answer: a) To promote free trade and economic growth

Question: Which of the following is not a principle of the World Trade Organization? A) Non-discrimination B) Transparency C) Protectionism D) Predictability

Answer: C) Protectionism

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