Background: The origin of WTO:-
• The World Trade Organization (WTO) came into being in 1995.
• One of the youngest of the international organizations, the WTO is the successor to  the General Agreement on Tariffs and Trade (GATT) established in the wake of the Second World War.

GATT
•  The General Agreement on Tariffs  and  Trade  was  the  first  worldwide multilateral  free  trade agreement.
•  It was in effect fromJune 30, 1948 until January 1, 1995.
•  It ended when it was replaced by the more robust World Trade Organization.

• So while  the  WTO  is  still  young,  the  multilateral  trading  system  that  was  originally  set  up under GATT is well over 60 years old.
• The  past  60  years  have  seen  an  exceptional  growth  in world  trade.  Merchandise  exports grew  on  average  by  6%  annually.  Total  trade  in  2000  was  22- times  the  level  of  1950.  GATT and the WTO have helped to create a strong and prosperous  trading system contributing to unprecedented growth.

How was the system developed?
• The  system  was  developed  through  a  series  of  trade  negotiations,  or  rounds,  held  under GATT.
• The GATT completed 8 rounds of multilateral trade negotiations (MTNs).
• The  first  rounds  dealt  mainly  with  tariff  reductions,  but  later  negotiations  included  other areas such as anti dumping and non-tariff measures.
• The last round —the 1986-94 Uruguay Round — led to the WTO’s creation
• The negotiations did not end there. Some continued after the end of the Uruguay Round.
• In   February   1997   agreement   was   reached   on   telecommunications   services,   with   69 governments  agreeing  to  wide - ranging  liberalization  measures  that  went  beyond  those agreed in the Uruguay Round.
• In the same year 40 governments successfully concluded negotiations for tariff-free trade in information  technology  products,  and  70  members  concluded  a  financial  services  deal covering more than 95% of trade in banking, insurance, securities and financial information.
• In  2000,  new  talks  started  on  agriculture  and  services.  These  have  now  been  incorporated into a broader agenda launched at the fourth WTO Ministerial Conference in Doha, Qatar, in November  2001 (once  in  every  two  years,  the  Ministerial Conference  of  the  WTO  takes place).
• The  work  programme,  the  Doha  Development  Agenda  (DDA),  adds  negotiations  and  other work  on  non-agricultural  tariffs,  trade  and  environment,  WTO  rules  such  as  anti-dumping and subsidies, investment, competition policy, trade facilitation, transparency in government procurement,  intellectual  property,  and  a  range  of  issues  raised  by  developing  countries  as difficulties they face in implementing the present WTO agreements.

Objectives and Functions of WTO:
The important objectives of WTO are:
- To improve the standard of living of people in the member countries.
- To ensure full employment and broad increase in effective demand.
- To enlarge production and trade of goods.
- To increase the trade of services.
- To ensure optimum utilization of world resources.
- To protect the environment.
- To accept the concept of sustainable development.

The main functions of WTO are:-
- To implement rules and provisions related to trade policy review mechanism.
- To provide a platform to member countries to decide future strategies related to trade and tariff.
- To  provide facilities  for implementation,administration and operation of  multilateral  and bilateral agreements of the world trade.
- To administer the rules and processes related to dispute settlement.
- To ensure the optimum use of world resources.
- To  assist  international organizations such as, IMF and IBRD for establishing  coherence  in Universal Economic Policy determination.

Structure of WTO:-
Members   The WTO has about 164 members, accounting for about 95% of world trade. Around 25 others are negotiating membership.

How are the decisions taken?
-  Decisions are made by the entire membership. This is typically by consensus
-  A  majority  vote  is  also  possible,  but  it  has  never  been  used  in  the  WTO,  and  was  extremely rare under the WTO’s predecessor, GATT.
-  The WTO’s agreements have been ratified in all members’ parliaments.

Decision-making body of WTO:
-  The WTO’s top level decision-making  body  is  the Ministerial  Conferencewhich  meets  at least once every two years.
-  Below this is the General Council (normally ambassadors and heads of delegation in Geneva, but sometimes officials sent from members’ capitals) which meets several times a year in the Geneva headquarters. The General Council also meets as the Trade  PolicyReview Body and the Dispute Settlement Body
-  At  the next level, the Goods Council, Services Council and Intellectual Property  (TRIPS) Council report to the General Council.
-  Numerous specialized  committees,  working  groups  and  working  partiesdeal  with  the individual agreements and other areas such as the environment, development, membership applications and regional trade agreements.

Director-General of WTO:
-  Roberto Azevêdo is the sixth Director-General of the WTO.
-  His appointment took effect on 1 September 2013 for a four-year term.
-  At  a meeting  of  the  General  Council  on  28  February  2017,  WTO  members  agreed  by consensus  to  appoint  Roberto  Azevêdo  as  Director-General  for  a  second  four-year  term, starting on 1 September 2017

Secretariat:
• The WTO Secretariat, based in Geneva, has around 640 staff and is headed by a director-general. Its annual budget is roughly 197 million Swiss francs.
•  It does not have branch offices outside Geneva. Since decisions are taken by the members themselves, the Secretariat does not have the decision-making role that other inter secretariat, Geneva national bureaucracies are given.The Secretariat’s main duties are:
? To supply technical support for the various councils and committees and the ministerial conferences;
? To provide technical assistance for developing countries,
? To analyze world trade and
? To explain WTO affairs to thepublic and media.
? It also provides some forms of legal assistance in the dispute settlement process and advises governments wishing to become members of the WTO

WTO Agreements:
• The WTO agreements cover goods, services and intellectual property.
• They spell out the principles of liberalization, and the permitted exceptions.
• They include individual countries’ commitments to lower customs tariffs and other trade  barriers, and to open and keep open services markets.
• They set procedures for settling disputes.
• They prescribe special treatment for developing countries.
• They require governments to make their trade policies transparent by notifying the WTO  about laws in force and measures adopted, and through regular reports by the secretariat on  countries’ trade policies.
• These agreements are often called the WTO’s trade rules, and the WTO is often described as  “rules-based”, a system based on rules. But it’s important to remember that the rules are actually agreements that governments negotiated.
• The basis of the present WTO system is Uruguay Round agreements (which was the 8th-last round of GATT).
• In fact, the agreements fall into a simple structure with six main parts: an umbrella agreement (the Agreement Establishing the WTO); agreements for each of the three broad  areas of trade that the WTO covers (goods, services and intellectual property); dispute  settlement; and reviews of governments’ trade policies.

in detail:
Goods:
•  It all began with trade in goods. From 1947 to 1994, GATT was the forum for negotiating  lower customs duty rates and other trade barriers; the text of the General Agreement spelt  out important rules, particularly non-discrimination.
• Since 1995, the updated GATT has become the WTO’s umbrella agreement for trade in goods.
•  It has annexes dealing with specific sectors such as agriculture and textiles, and with specific  issues such as state trading, product standards, subsidies and actions taken against dumping.

Services:
•  Banks,insurance firms, telecommunications companies, tour operators, hotel chains and transport companies looking to do business abroad can now enjoy the same principles of freer and fairer trade that originally only applied to trade in goods.
• These principles appear in the new General Agreement on Trade in Services (GATS)
• WTO members have also made individual commitments under GATS stating which of their  services sectors they are willing to open to foreign competition, and how open those markets are.
 
The four modes of supply are as follows:
MODE 1– Cross-border supply such as business process outsourcing, transportation, distance  education etc.
MODE  2– Delivery of services through representative office for e.g. foreign banks in India to deliver services to local people.
MODE 3 – Consumption abroad, for example, services availed by tourists in foreign countries.
MODE 4 – Movement of personnel to deliver services abroad, for instance, Indian doctors delivering services at foreign locations.

intellectual property
•   The WTO’s intellectual property agreement amounts to rules for trade and investment in  ideas and creativity.
•  The rules state how copyrights, patents, trademarks, geographical names used to identify  products, industrial designs, integrated circuit layout-designs and undisclosed information  such as trade secrets —“intellectual property” —should be protected when trade is involved.
•  The basic principles related to the Intellectual Property agreements are mentioned in  “TheAgreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)”

TRIPS:
•  The Agreement on Trade -Related Aspects of Intellectual Property Rights (TRIPS) is an international legal agreement between all the member nations of the World Trade Organization(WTO).
•  It sets down minimum standards for the regulation by national governments of many forms  Of intellectual property (IP) as applied to nationals of other WTO member nations.
•  TRIPS was negotiated at the end of the Uruguay Round of theGeneral Agreement on Tariffs  and Trade (GATT) in 1994 and is administered by the WTO

Dispute Settlement:
•  The WTO’s procedure for resolving trade quarrels under the Dispute Settlement  Understanding is vital for enforcing the rules and therefore for ensuring that trade flows  smoothly.
•  Countries bring disputes to the WTO if they think their rights under the agreements are being  infringed.
•  Judgements by specially-appointed independent experts are based on interpretations of the  agreements and individual countries’ commitments.
•  The system encourages countries to settle their differences through consultation. Fai ling that, they can follow a carefully mapped out, stage-by-stage procedure that includes the  possibility of a ruling by a panel of experts, and the chance to appeal the ruling on legal grounds.
•  Confidence in the system is borne out by the number of cases]brought to the WTO —around  300 cases in eight years compared to the 300 disputes dealt with during the entire life of GATT (1947–94).

Policy Review:
•  The Trade Policy Review Mechanism’s purpose is to improve transparency, to create a  greater understanding of the policies that countries are adopting, and to assess their impact.
•  Many members also see the reviews as constructive feedback on their policies.
•  All WTO members must undergo periodic scrutiny, each review containing reports by the country concerned and the WTO Secretariat.

Principles of the Trading system:
•  The WTO agreements are lengthy and complex because they are legal texts covering a wide  range of activities.
•  They deal with: agriculture, textiles and clothing, banking, telecommunications, government  purchases, industrial standards and product safety, food sanitation regulations, intellectual  property, and much more.
•   But a number of simple, fundamental principles run throughout all of these documents.
•   These principles are the foundation of the multilateral trading system.In the following section, we will have a closer look at these principles:

Most-favoured-nation (MFN): treating other people equally:
•  Under the WTO agreements, countries cannot normally discriminate between their trading  partners.
•  If a country grants someone a special favor (such as a lower customs duty rate for one of  their products) then it must do the same for all other WTO members.
•  This principle is known as most-favoured-nation (MFN) treatment
•   It is so important that it is the first article of the General Agreement on Tariffs and Trade  (GATT), which governs trade in goods.
•   MFN is also a priority in the General Agreement on Trade in Services (GATS) (Article 2) and  the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) (Article 4),  although in each agreement the principle is handled slightly differently.
•   Together, those three agreements cover all three main areas of trade handled by the WTO.

Exceptions:
•  Some exceptions are allowed.
•  For example, countries can set up a free trade agreement that applies only to goods traded within the group discriminating against goods from outside.
•  Or they can give developing countries special access to their markets.
•  Or a country can raise barriers against products that are considered to be traded unfairly from specific countries.
•  And in services, countries are allowed, in limited circumstances, to discriminate.
•  But the agreements only permit these exceptions under strict conditions.

In general, MFN means that every time a country lowers a trade barrier or opens up a market, it has to do so for the same goods or services from all its trading partners
whether rich or poor, weak or strong.

National Treatment: Treating locals and foreigners equally:
•  Imported and locally produced goods should be treated equally at least after the foreign  goods have entered the market.
•  The same should apply to foreign and domestic services, and to foreign and local trade marks, copyrights and patents.
•  This principle of “national treatment” (giving others the same treatment as one’s own nationals) is also found in all the three main WTO agreements (Article 3 of GATT, Article 17 of GATS and Article 3 of TRIPS), although once again the principle is handled slightly differently in each of these.
•   National treatment only applies once a product, service or item of intellectual property has entered the market.
•   Therefore, charging customs duty on an import is not a violation of national treatment even if locally produced products are not charged an equivalent tax.

Freer trade: Gradually through negotiation
•   Lowering trade barriers is one of the most obvious means of encouraging trade.
•   The barriers concerned include customs duties (or tariffs) and measures such as import bans  or quotas that restrict quantities selectively.
•   From time to time other issues such as red tape and exchange rate policies have also been discussed
•   Opening markets can be beneficial, but it also requires adjustment. The WTO agreements  allow countries to introduce changes gradually, through “progressive liberalization”.
•   Developing countries are usually given longer to fulfil their obligations.

Predictability: through binding and transparency:
•   Sometimes, promising not to raise a trade barriercan be as important as lowering one,  because the promise gives businesses a clearer view of their future opportunities.
•   With stability and predictability, investment is encouraged, jobs are created and consumers  can fully enjoy the benefits of competition choice and lower prices.
•   The multilateral trading system is an attempt by governments to make the business  environment stable and predictable.
•   In the WTO, when countries agree to open their markets for goods or services, they “bind”  their commitments.
•   For goods, these bindings amount to ceilings on customs tariff rates. Sometimes countries  tax imports at rates that are lower than the bound rates. Frequently this is the case in developing countries. In developed countries the rates actually charged and the bound rates  tend to be the same.
•   A country can change its bindings, but only after negotiating with its trading partners, which  could mean compensating them for loss of trade.
•   One of the achievements of the Uruguay Round of multilateral trade talks was to increase  the amount of trade under binding commitments.
•   In agriculture, 100% of products now have bound tariffs. The result of all this: a substantially  higher degree of market security for traders and investors.
•   The system tries to improve predictability and stability in other ways as well.
•   One way is to discourage the use of quotas and other measures used to set limits on quantities of imports administering quotas can lead to more red tape and accusations of  unfair play.
•   Another is to make countries’ trade rules as clear and public (“transparent”) as possible
•   Many WTO agreements require governments to disclose their policies and practices publicly  within the country or by notifying the WTO.
•   The regular surveillance of national trade policies through the Trade Policy Review Mechanism provides a further means of encouraging transparency both domestically and at  the multilateral level.

Promising fair competition:

•   The WTO is sometimes described as a “free trade” institution, but that is not entirely  accurate.
•   The system does allow tariffs and, in limited circumstances, other forms of protection.
•   More accurately, it is a system of rules dedicated to open, fair and undistorted competition.
•   The rules on nondiscrimination MFN and national treatment are designed to secure fair conditions of trade.
•   So too are those on dumping (exporting at below cost to gain market share) and subsidies.
•   The issues are complex, and the rules try to establish what is fair or unfair, and how  governments can respond, in particular by charging additional import duties calculated to  compensate for damage caused by unfair trade.
•   Many of the other WTO agreements aim to support fair competition: in agriculture,  intellectual property, services, for example. The agreement on government procurement (a  “plurilateral” agreement because it is signed by only a few WTO members) extends  competition rules to purchases by thousands of government entities in many countries.

Encouraging Development and Economic Reform:

•   The WTO system contributes to development.
•   On the other hand, developing countries need flexibility in the time they take to implement  the system’s agreements.
•   And the agreements themsel ves inherit the earlier provisions of GATT that allow for special  assistance and trade concessions for developing countries.
•   Over three quarters of WTO members are developing countries and countries in transition to  market economies.
•   During the seven and a half years of the Uruguay Round, over 60 of these countries  implemented trade liberalization programmes autonomously.
•   At the same time, developing countries and transition economies were much more active  and influential in the Uruguay Round negotiations than in any previous round, and they are  even more so in the current Doha Development Agenda.
•   At the end of the Uruguay Round, developing countries were prepared to take on most of  the obligations that are required of developed countries.
•   But the agreements did give them transition periods to adjust to the more unfamiliar and,  perhaps, difficult WTO provisions particularly so for the poorest, “least developed” countries.
•   A ministerial decision adopted at the end of the round says betteroff countries should  accelerate implementing market access commitments on goods exported by the least developed countries, and it seeks increased technical assistance for them.
•   More recently, developed countries have started to allow dutyfree and quotafree imports  For almost all products from least developed countries.
•   On all of this, the WTO and its members are still going through a learning process. The  current Doha Development Agenda includes developing countries’ concerns about the  difficulties they face in implementing the Uruguay Round agreements.