WORLD TRADE

ORGANIZATION PRESENTED BY:

HAFSA IFTIKHAR
KULSOOM FATIMA
FARHAN FAROOQ
LEARNING OBJECTIVES
1) To have an understanding of WTO and the principles and functions of WTO
2) To study the structure of WTO
3) To study the role of WTO
4) To study the provision of TRIPs, TRIMs of WTO
5) To have a knowledge of different agreements done under WTO guidance
6) To study the issues
 SCHEME OF PRESENTATION
1) Introduction
2) Information
3) Formation
4) Objective
5) Structure
6) Members
7) Principles
8) Functions
9) Agreements and policies
10) Advantages and disadvantages
11) Issues
12) Impact on Pakistan
INTRODUCTON
The World Trade Organization (WTO) is an organization that intends to supervise and liberalize
international trade. The WTO is the only global international organization dealing with the rules
of trade between nations.
At its heart are the WTO agreements, negotiated and signed by the bulk of world’s trading
nations and ratified in their parliaments. The goal is to help producers of goods and services,
exporters and importers conduct their business.
The WTO superseded and replaced the GATT which was a provisional, multilateral agreement
governing international trade from 1947 until Jan 1, 1995.
The WTO has larger membership than GATT, the number of members stand at 153.
INFORMATION
Established: 1st January 1995.
Created By: Uruguay Round negotiations (1986-1994)
Headquarter: Geneva, Switzerland
Membership: 153 member states (till 2008)
Secretariat Staff: 625
Head: Pascal Lamy (Director-General)
Budget: 196 million Swiss francs (approx)
FORMATION OF THE WTO
The GATT was the only multilateral instrument governing international trade from 1948 until
the WTO was established in 1995. The GATT managed to operate for almost half a century as a
semi institutionalized multilateral treaty regime on a provisional basis.
Seven rounds of negotiations occurred under the GATT
The Tokyo round during the 70s was the first major attempt to tackle trade barriers that do not
take the form of tariffs and to improve the system but the agreements were not accepted by all
the member nations of GATT.
These agreements and policies were amended in URUGUAY ROUND leading to acceptance by
the member nations and formation of WTO.
This final act concluding the Uruguay round and officially establishing the WTO regime was
signed in 1994 at Marrakesh, Morroco and hence known as Marrakesh Agreement.
OBJECTIVE OF WTO
To implement the new world trade system as visualized in the agreement
To promote world trade in a manner that benefits every country
To ensure developing countries secure a better balance in sharing of the advantages resulting
from the expansion of international trade corresponding to their developmental needs
To enhance competitiveness among all trading nations as to benefit customers
To increase the level of production and productivity with a view of ensuring level of
employment in the world
To demolish all hurdles in to an open world trading system and usher in international economic
renaissance
STRUCTURE OF WTO
WTO: THE MEMBERS
The WTO is composed of 153 countries which represents 95% of world trade, of these, 123
were signed during the Uruguay round
WTO members do not have to be full-sovereign nation members. Instead, they must be a
custom territory with full autonomy in their external relations.
Over 3/4th of WTO members are developing or least developed countries.
There are 30 countries that are not members known as Observers. These countries are
currently negotiating membership.
The biggest of these non-members is Russia, however they are in the process of accession.
Ukraine became the newest member on May 16, 2008
WTO: THE MEMBERS
WTO PRINCIPLES:
 Without Discrimination – (MFN and National treatment to all)
Free – With barriers coming down through negotiation
Predictable – Bound tariffs
More Competitive – By discouraging “unfair” practices such as export subsidies and dumping
products at below cost to gain market share
More Beneficial for Less Developed Countries – By giving them more time to adjust, greater
flexibility, and special privileges
FUNCTIONS OF WTO
The main function is to ensure that trade flows as smoothly, predictably and freely as possible.
Administering trade agreements- WTO agreements cover goods, services, intellectual property.
Acting as a forum for trade negotiations
Settling trade disputes-Importantly WTO set procedures to settle disputes
Reviewing national trade policies
Assisting developing countries in trade policy issues, through technical assistance and training
programs.
FUNCTIONS OF WTO (cont.)
Negotiating the reduction or elimination of obstacles to trade (import tariffs, other barriers to
trade) and agreeing on rules governing the conduct of international trade.
Assisting the process of accession of some 30 countries who are not yet members of the
organization.
Co-operating with other international organizations- IMF and The World Bank.
World Trade Organization coordinates with its secretariat, which employees 500 + staff
including Economists, Statisticians, Lawyers and other experts in related area of concern.
WTO: AGREEMENTS & POLICIES
The WTO‟s agreements are the result of negotiations between the members.
The current set were the outcome of the 1986–94 Uruguay Round negotiations which
included a major revision of the original General Agreement on Tariffs and Trade (GATT).
The WTO oversees about 60 different agreements which have the status of international
legal texts.
They deal with: agriculture, textiles and clothing, banking, telecommunications,
government purchases, industrial standards, product safety and more.
WTO: AGREEMENTS & POLICIES
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
Services
• These principles appear in the new General Agreement on Trade in Services (GATS).
Intellectual property
• The WTO‟s intellectual property agreement amounts to rules for trade and investment in ideas
and creativity.
Dispute settlement
• The system encourages countries to settle their differences through consultation
WTO AGREEMENTS: GATS
General Agreement on Trade in Services, is the first and the only comprehensive multilateral discipline
covering international trade in Services.
WTO services are divided into 12 areas and sub divided into 164 areas: Business Services,
Communication Services, Construction and Engineering Services, Distribution Services, Education
Services, Environmental Services, Financial Services, Health Services, Tourism and travel Services,
Recreation, cultural and sporting Services, Transport Services.
Modes of supply of services Consumption Abroad Cross - Border Supply Commercial Presence
Movement of Natural persons. The important principles falling in this category are:
•Most favored Nation principle (MFN)
•Domestic Regulations
•Transparency.
 WTO AGREEMENTS: TRIPS
It is the GATT Uruguay Round Agreement on Trade Related Intellectual Property. It deals with the protection &
enforcement of “Trade-Related” intellectual property “rights".
DEALS IN :
●How to give adequate protection to intellectual property rights
●How countries should enforce those rights adequately in their own territories
●How to settle disputes on intellectual property between members of the WTO
●Special transitional arrangements during the period when the new system is being introduced. Intellectual
property comprises 2 distinct forms:
Literary & Artistic Works- Books, paintings, musical compositions, plays, operas, movies, radio/ TV programs,
performances, & other artistic works
 Industrial Property- Patented objects, trade secrets, geographical indications.
WTO AGREEMENTS: TRIMS
Trade related Investment Measures does not provide any new language , but It concentrates on 2
major articles.
Article III & Article IX which talks about National Treatment and Trade Restrictions respectively.
ARTICLE III:
●National treatment of imported product, unless specified in other agreements.
●Subjects the purchase or use by an enterprise of imported products to less favorable conditions
than the purchase or use of domestic products.
ARTICLE XI:
●Prohibition of quantitative restrictions on imports and exports.
●Part of the general trend in textiles and agriculture to phase out the use of quantitative restrictions.
WTO AGREEMENTS: SANITARY AND
PHYTO-SANITARY (SPS) AGREEMENT

SPS agreement was negotiated during the Uruguay Round, and entered into force with the
establishment of the WTO in1995.
The WTO sets constraints on member- states policies relating to food safety (bacterial
contaminants, pesticides, inspection and labeling) as well as animal and plant health (imported
pests and diseases).
WTO AGREEMENTS: AOA
The most important agreement follows. The Agreement on Agriculture came into effect with
the establishment of the WTO at the beginning of 1995
The AOA has three central concepts, or "PILLARS":
• Domestic support
• Market access
• Export subsidies
Objective: To reform trade in agriculture and to make policies more market oriented
WTO AGREEMENTS: ANTI-
DUMPING PRACTICES (ADP)
A product is considered to be dumped if the export price is less than the price charged for the
same product in the exporting country, or it is sold for less than its cost of production.
The WTO agreement on anti-dumping allows governments to act against dumping where there
is genuine (material) injury to the competing domestic industry.
 ADVANTAGES
The WTO is a body designed to promote free trade through organizing trade negotiations and act as an
independent arbiter in settling trade disputes. To some extent the WTO has been successful in promoting greater
free trade.

Free trade has many advantages, such as:

Lower prices for consumers. Removing tariffs enables us to buy cheaper imports

Free trade encourages greater competitiveness. Firms face a higher incentive to cut costs. For example, a
domestic monopoly may now face competition from foreign firms.

Law of comparative advantage states that free trade will enable an increase in economic welfare. This is because
countries can specialize in producing goods where they have a lower opportunity cost.
Economies of scale. By encouraging free trade, firms can specialize and produce a higher quantity. This enables
more economies of scale, this is important for industries with high fixed costs, such as car and airplane
manufacture.
Free trade can help increase global economic growth.
BENEFITS OF FREE TRADE
1. The theory of comparative advantage
This explains that by specializing in goods where countries have a lower opportunity cost, there
can be an increase in economic welfare for all countries. Free trade enables countries to
specialize in those goods where they have a comparative advantage.
2. Economies of scale
If countries can specialize in certain goods they can benefit from economies of scale and lower
average costs; this is especially true in industries with high fixed costs or that require high levels
of investment. The benefits of economies of scale will ultimately lead to lower prices for
consumers and greater efficiency for exporting firms.
BENEFITS OF FREE TRADE
3. Increased competition
With more trade, domestic firms will face more competition from abroad. Therefore, there will
be more incentives to cut costs and increase efficiency. It may prevent domestic monopolies
from charging too high prices.
4. Trade is an engine of growth.
World trade has increased by an average of 7% since 1945, causing this to be one of the
significant contributors to economic growth.
5. Tariffs may encourage inefficiency
If an economy protects its domestic industry by increasing tariffs industries may not have any
incentives to cut costs.
DISADVANTAGES
The WTO has often been criticized for ignoring the dilemma of the developing world.
It is argued the benefits of free trade accrue mostly to the developed world.
Free trade may prevent developing economies develop their infant industries. For example, if a
developing economy was trying to diversify their economy to develop a new manufacturing
industry, they may be unable to do it without some tariff protection.
 ARGUMENTS AGAINST FREE
TRADE
1. To diversify the economy
Many developing countries rely on producing primary products in which
they currently have a comparative advantage. However relying on agricultural products has several disadvantages
◦ Prices can fluctuate due to environmental factors
◦ Goods have a low income elasticity of demand. Therefore with economic growth demand will only increase a little

2. Raise revenue for the government.

Import taxes can be used to raise money for the government however this will only be a relatively small amount of
money
3. Cultural Identity
This is not really an economic argument but more political and cultural. Many countries wish to protect their countries
from what they see as an Americanization or commercialization of their countries
ARGUMENTS AGAINST FREE
TRADE
4. Help the Balance of Payments
Reducing imports can help the current account as it restricts imports. However in the long term this is likely to lead to
retaliation and also cause lower exports so it might soon prove counter-productive.
5. Protection against dumping
Dumping occurs when a country has excess stock and so it sells below cost on global markets causing other producers to
become unprofitable. The EU sold a lot of its food surplus from the CAP at very low prices on the world market; this
caused problems for world farmers because they saw a big fall in their market prices. Other examples include allegations
that China has been dumping excess supply of steel on global markets causing other firms to go out of business.
6. Environmental
It is argued that free trade can harm the environment because LDC may use up natural reserves of raw materials to
export. Also countries with strict pollution controls may find consumers import the goods from other countries where
legislation is lax and pollution allowed.
However supporters of free trade would argue that it is up to individual countries to create environmental legislation
WTO ISSUES IN PAKISTAN
More stringent Food Safety Standards imposed in Pakistan.
Food Laws, standards, procedures, testing infrastructure, nutrition and labeling methods are
dreadfully primitive and ineffective.
Pakistan's food is merely exported as a commodity rather than as value added foods.
IMPACT OF WTO ON PAKISTAN
Limited export-due to non compliance of WTO regulations
Increased imports
Reduced Industrialization
Less Employment – 10% unemployment
Loss in economic sovereignty
CONCLUSION
The countries make their decisions through various councils and committees, whose
membership consists of all WTO members.
The system helps promote peace, by handling Dispute of member countries. It provides free
trade which cuts the costs of living and provides more choice of products and qualities and
stimulates economic growth.
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.
CONCLUSION
WTO deals with the special needs of developing countries as two thirds of the WTO members
are developing countries and they play an increasingly important and active role in the WTO
because of their numbers, because they are becoming more important in the global economy,
and because they increasingly look to trade as a vital tool in their development efforts.