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The World Trade Organization (WTO), is an international organization designed to supervise and liberalize international trade. The WTO came into being on January 1, 1995, and is the successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1948, and continued to operate for almost five decades as a de facto international organization. The World Trade Organization deals with the rules of trade between nations at a near-global level; it is responsible for negotiating and implementing new trade agreements, and is in charge of policing member countries' adherence to all the WTO agreements, signed by the bulk of the world's trading nations and ratified in their parliaments. Most of the WTO's current work comes from the 1986-94 negotiations called the Uruguay Round, and earlier negotiations under the GATT. The organization is currently the host to new negotiations, under the Doha Development Agenda (DDA) launched in 2001. The WTO is governed by a Ministerial Conference, which meets every two years; a General Council, which implements the conference's policy decisions and is responsible for day-to-day administration; and a director-general, who is appointed by the Ministerial Conference. The WTO's headquarters are in Geneva, Switzerland. WHY INTERNATIONAL TRADE? International trade is the exchange of goods and services across international boundaries or territories. In most countries, it represents a significant share of GDP. Amongst the strong proponents of International Trade, the name of David Ricardo and his theory of Comparative Advantage is of umpteen importance. Ricardo was opposed to tariffs and other restrictions on international trade. Ricardo devised an idea that is well known as the theory of comparative advantage. In the Principles of Economics, it states comparative advantage is a specialization technique used to create more efficient production and describes opportunity cost between producers. With perfect competition and undistorted markets, countries tend to export goods in which they have a comparative advantage ("Comparative Advantage"). For example, we should think of two countries that both make cards and pencils and use the same amount of time to make one unit of items (please see table). Country one can make 4 pencils if they specialize just in pencils at the expense of one card, but this country can also make ¼ of a card at the expense of one pencil. The same logic goes for country two: if country two makes only pencils, it will make 2 pencils at the expense of 1 card. If country two specializes only in cards, it will make ½ of a card at the expense of a pencil. For this example, country one has a comparative advantage in pencils over country two (4 pencils to 2 pencils), whereas, country two has a comparative advantage in cards over country one (½ of a card to ¼ of a card). In Ricardo's idea of comparative advantage, these two countries should specialize in what they do best. According to The Fortune Encyclopedia of Economics, Ricardo's idea of comparative advantage is "the main basis for most economists' belief in free trade today”. 1 Card

1 Pencil

Country One 4 Pencils 1/4 of a Card Country Two 2 Pencils 1/2 of a Card

Apart from the comparative advantage theory, some other important theories that come out in favour of International Trade are: New trade theory, Heckscher-Ohlin model, Specific Factors, Gravity model, etc.

IMPACT OF SECOND WORLD WAR ON INTERNATIONAL TRADE After the Wall Street crash, which led to a worldwide slump in economic growth, the world reverted to protectionism. Trade fell even faster, causing more unemployment and prolonging the downturn. Some countries turned to dictators like Hitler for economic and political salvation. After two world wars, most of Europe and Japan was struggling to feed its people, let alone prosper. In order to protect the domestic industries and to promote self reliance; trade barriers in form of high tariffs, quotas, subsidies, etc. were set up to prevent outsiders to make profitable business. Nations became dependent on the revival of world trade for vital income. America, which suffered less from the crippling effects of the wars, was economically dominant and was under pressure to open up its markets to other countries. International Trade Organisation (ITO) The Bretton Woods Conference of 1944 recognized the need for a comparable international institution for trade (the later proposed International Trade Organization (ITO)) to complement the International Monetary Fund and the World Bank. In early December 1945, the United States invited its war-time allies to enter into negotiations to conclude a multilateral agreement for the reciprocal reduction of tariffs on trade in goods.At the proposal of the United States, the United Nations Economic and Social Committee adopted a resolution, in February 1946, calling for a conference to draft a charter for an International Trade Organization (ITO). A Preparatory Committee was established in February 1946, and met for the first time in London in October 1946 to work on the charter of an international organization for trade; the work was continued from April to November 1947. In March 1948, the negotiations on the ITO Charter were successfully completed in Havana. The Charter provided for the establishment of the ITO, and set out the basic rules for international trade and other international economic matters. The ITO Charter, however, never entered into force; while repeatedly submitted to the US Congress, it was never approved. The most usual argument against the new organization was that it would be involved into internal economic issues. On December 6, 1950 President Truman announced that he would no longer seek Congressional approval of the ITO Charter. General Agreement on Trade and Tariffs The negotiations on the GATT in Geneva advanced well and by October 1947 an agreement was reached: on October 30, 1947 eight of the twenty-three countries that had negotiated the GATT signed the "Protocol of Provisional Application of the General Agreement on Tariffs and Trade" In the absence of an international organization for trade, countries turned, from the early fifties, to the only existing multilateral international institution for trade, the "GATT 1947" to handle problems concerning their trade relations. Therefore, the GATT would over the years "transform itself" into a de facto international organization. It was contemplated that the GATT would be applied for several years until the ITO came into force. However, since the ITO was never brought into being, the GATT gradually became the focus for international governmental cooperation on trade matters. Institutionalisation of Trade The GATT was the only multilateral instrument governing international trade from 1948 until the WTO was established in 1995. Despite attempts in the mid 1950s and 1960s to create some form of institutional mechanism for international trade, the GATT continued to operate for almost half a century as a semiinstitutionalized multilateral treaty regime on a provisional basis.

The Trade Rounds : The Package Route Seven rounds of negotiations occurred under the GATT. The first GATT trade rounds concentrated on further reducing tariffs. Then, the Kennedy Round in the mid-sixties brought about a GATT anti-dumping Agreement and a section on development. The Tokyo Round during the seventies was the first major attempt to tackle trade barriers that do not take the form of tariffs, and to improve the system, adopting a series of agreements on non-tariff barriers, which in some cases interpreted existing GATT rules, and in others broke entirely new ground. During the Tokyo Round, there were reduced tariffs and established new regulations aimed at controlling the proliferation of non-tariff barriers and voluntary export restrictions. Concessions were made on $190 billion worth of tariffs.

Uruguay Round The 1982 Ministerial Declaration identified problems including structural deficiencies, spill-over impacts of certain countries' policies on world trade GATT could not manage. To address these issues, the eighth GATT round (known as the Uruguay Round) was launched in September 1986, in Punta del Este, Uruguay. It was the biggest negotiating mandate on trade ever agreed: the talks were going to extend the trading system into several new areas, notably trade in services and intellectual property, and to reform trade in the sensitive sectors of agriculture and textiles; all the original GATT articles were up for review. The round was supposed to end in December 1990, but the US and EU disagreed on how to reform agricultural trade and decided to extend the talks. Finally, In November 1992, the US and EU settled most of their differences in a deal known informally as "the Blair House accord", and on April 15, 1994, the deal was signed by ministers from most of the 123 participating governments at a meeting in Marrakesh, Morocco. The agreement established the World Trade Organization, which came into being upon its entry into force on January 1, 1995, to replace the GATT system. It is widely regarded as the most profound institutional reform of the world trading system since the GATT's establishment. WORLD TRADE ORGANISATION The World Trade Organization (WTO), is an international organization designed to supervise and liberalize international trade. The WTO came into being on January 1, 1995, and is the successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1948, and continued to operate for almost five decades as a de facto international organization. The WTO's stated goal is to improve the welfare of the peoples of its member countries, specifically by lowering trade barriers and providing a platform for negotiation of trade. Its main mission is "to ensure that trade flows as smoothly, predictably and freely as possible". This main mission is further specified in certain core functions serving and safeguarding five fundamental principles, which are the foundation of the multilateral trading system. Functions Among the various functions of the WTO, these are regarded by analysts as the most important: • It oversees the implementation, administration and operation of the covered agreements. • It provides a forum for negotiations and for settling disputes. Additionally, it is the WTO's duty to review the national trade policies, and to ensure the coherence and transparency of trade policies through surveillance in global economic 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 center 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 The WTO establishes a framework for trade policies; it does not define or specify outcomes. That is, 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.

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Non-Discrimination. It has two major components: (1) the most favoured nation (MFN) rule, and (2) 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 favorable 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). Freer trade; gradually through negotiation (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. Predictability: Through Binding The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are enumerated in schedules (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. 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. Promoting Fair Competition 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.

Doha Development Round The Doha Development Round commenced at Doha, Qatar in November 2001 and is still continuing. Its objective is to lower trade barriers around the world, permitting free trade between countries of varying prosperity. As of 2007, talks have stalled over a divide between the developed nations led by the European Union, the United States and Japan and the major developing countries (represented by the G20 developing nations), led and represented mainly by India, Brazil, China and South Africa. The Doha Round began with a ministerial-level meeting in Doha, Qatar in 2001. Subsequent ministerial meetings took place in Cancún, Mexico (2003), and Hong Kong, China (2005). Related negotiations took place in Geneva, Switzerland; Paris, France; and again in Geneva. Major Agreements under GATT and WTO There have been various agreements negotiated across GATT and WTO set up multilaterally. Among them the major ones are :         

Agreement on Agriculture Textiles and Clothing Trade Related Investment Measures (TRIMS) Anti-Dumping Measures Subsidies and Counter-Measures General Agreement on Trade in Services (GATS) Trade Related Aspects of Intellectual Property Rights (TRIPS) Sanitary and Phyto-Sanitary(SPS) Agreement Agreement on Technical Barriers to Trade (TBT)

Trade Related Aspects of Intellectual Property Rights (TRIPS) In law, intellectual property (IP) is an umbrella term for various legal entitlements which attach to certain names, written and recorded media, and inventions. The holders of these legal entitlements may exercise various exclusive rights in relation to the subject matter of the IP. The adjective "intellectual" reflects the fact that this term concerns a process of the mind. TRIPS contains requirements that nations' laws must meet for: copyright rights, including the rights of performers, producers of sound recordings and broadcasting organizations; geographical indications, including appellations of origin; industrial designs; integrated circuit layout-designs; patents; monopolies for the developers of new plant varieties; trademarks; trade dress; and undisclosed or confidential information. Many of the TRIPS provisions on copyright were imported from the Berne Convention for the Protection of Literary and Artistic Works and many of its trademark and patent provisions were imported from the Paris Convention for the Protection of Industrial Property TRIPS also specifies enforcement procedures, remedies, and dispute resolution procedures. The TRIPS agreement introduced intellectual property law into the international trading system for the first time, and remains the most comprehensive international agreement on intellectual property to date. Controversy Since TRIPS came into force it has received a growing level of criticism from developing countries, academics, and Non-governmental organizations. Some of this criticism is against the WTO as a whole, but many advocates of trade liberalization also regard TRIPS as bad policy. TRIPS' wealth redistribution effects (moving money from people in developing countries to copyright and patent owners in developed countries)

and its imposition of artificial scarcity on the citizens of countries that would otherwise have had weaker intellectual property laws, are a common basis for such criticisms. Access to essential medicines The most visible conflict has been over AIDS drugs in Africa. Despite the role which patents have played in maintaining higher drug costs for public health programs across Africa, this controversy has not led to a revision of TRIPs. Instead, an interpretive statement, the Doha Declaration, was issued in November 2001, which indicated that TRIPs should not prevent states from dealing with public health crises. After Doha, PhRMA, the United States and to a lesser extent other developed nations began working to minimize the effect of the declaration. A 2003 agreement loosened the domestic market requirement, and allows developing countries to export to other countries where there is a national health problem as long as drugs exported are not part of a commercial or industrial policy. Drugs exported under such a regime may be packaged or colored differently to prevent them from prejudicing markets in the developed world. Another controversy has been over the TRIPS Article 27 requirements for patentability "in all fields of technology", and whether or not this necessitates the granting of software and business method patents. General Agreement on Trade in Services (GATS) The General Agreement on Trade in Services (GATS) is a treaty of the World Trade Organization (WTO) that entered into force in January 1995 as a result of the Uruguay Round negotiations. The treaty was created to extend the multilateral trading system to services, in the same way the General Agreement on Tariffs and Trade (GATT) provides such a system for merchandise trade. All members of the WTO are signatories to the GATS. The basic WTO principle of most favoured nation (MFN) applies to GATS as well. Four Modes of Supply The agreement covers all internationally traded services. It also defines four modes of trading services : 1. Services supplied from one country to another(e.g. international telephone calls), officially known as ‘Cross Border Supply’ 2. Consumers or firms making use of a service in another country (e.g. Tourism), officially ‘Consumption Abroad’ 3. A foreign company setting up subsidiaries or branches to provide services in another country (e.g. foreign banks setting up operations in a country), officially, ‘Commercial Presence’ 4. Individuals traveling from their own country to supply services in another (e.g. fashion models or consultants), officially ‘Presence of Natural Persons’ Criticisms The GATS document has been criticized for allegedly replacing the authority of national legislature, with the authority of the GATS Disputes Panel. Such allegations argue that GATS intends to override all "burdensome rules". The WTO and member governments disagree with such allegations. GATS hearings are closed and held in secret. While national governments have an option to exclude any specific service from liberalisation under the GATS, they are also under international pressure to refrain from so excluding any service "provided on a commercial basis". However, important public utilities including water and electricity supply most

commonly involve purchase by consumers and are thus demonstrably "provided on a commercial basis". The same may be said of many health and education services which are sought to be 'exported' by some countries as profitable industries. The most notorious privatisation of a public utility occurred in January 2000 when the government of Bolivia gave control over the water supply of the city of Cochabamba to a Bechtel Corporation subsidiary, a deal which resulted in a steep price increase, widespread public protest and the shooting of protesters by troops. When the corporation was forced to give up, it filed a multimillion-dollar legal demand in a World Bank tribunal against the government for its loss of potential profits. After persistent international criticism over several years, Structure of WTO Highest level: Ministerial Conference The topmost decision-making body of the WTO is the Ministerial Conference, which has to meet at least every two years. It brings together all members of the WTO, all of which are countries or separate customs territories. The Ministerial Conference can make decisions on all matters under any of the multilateral trade agreements Second level: General Council The daily work of the ministerial conference is handled by three groups: the General Council, the Dispute Settlement Body, and the Trade Policy Review Body. All three consist of the same membership representatives of all WTO members - but each meets under different rules Third level: Councils for Trade The Councils for Trade work under the General Council. There are three councils - Council for Trade in Goods, Council for Trade-Related Aspects of Intellectual Property Rights, and Council for Trade in Services - each council works in different fields. Apart from these three councils, six other bodies report to the General Council reporting on issues such as trade and development, the environment, regional trading arrangements and administrative issues. Fourth Level : Subsidiary Bodies There are subsidiary bodies under each of the three councils Criticisms of WTO The stated aim of the World Trade Organization (WTO) is to promote free trade and stimulate economic growth. Some people argue that free trade leads to a divergence instead of convergence of income levels within rich and poor countries.[1] WTO treaties have also been accused of a partial and unfair bias toward multinational corporations and wealthy nations. Developing countries Critics contend that small countries in the WTO wield little influence, and despite the WTO aim of helping the developing countries, the influential nations in the WTO focus on their own commercial interests. Some examples of this bias are: * Rich countries are able to maintain high import duties and quotas in certain products, blocking imports from developing countries (e.g. clothing);

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The increase in non-tariff barriers such as anti-dumping measures allowed against developing countries; The maintenance of high protection of agriculture in developed countries while developing ones are pressed to open their markets; Many developing countries do not have the capacity to follow the negotiations and participate actively in the Uruguay Round; and The TRIPs agreement which limits developing countries from utilizing some technology that originates from abroad in their local systems (including medicines and agricultural products).

Labor and environment Other critics claim that the issues of labor and environment are steadfastly ignored. Steve Charnovitz, former Director of the Global Environment and Trade Study (GETS), believes that the WTO "should begin to address the link between trade and labor and environmental concerns." He also argues that "in the absence of proper environmental regulation and resource management, increased trade might cause so much adverse damage that the gains from trade would be less than the environmental costs." Further, labor unions condemn the labor rights record of developing countries, arguing that to the extent the WTO succeeds at promoting globalization, then in equal measure do the environment and labor rights suffer. Decision making Other critics have characterized the decision making in the WTO as complicated, ineffective, unrepresentative and non-inclusive; more active participants, representing more diverse interests and objectives, have complicated WTO decision-making, and the process of "consensus-building" has broken down. They argue that the GATT decision making worked in the past because there were fewer countries actively engaged and there was no compulsion for all countries to adhere to the results. They have thus proposed the establishment of a small, informal steering committee (a "consultative board") that can be delegated responsibility for developing consensus on trade issues among the member countries. The Third World Network has called the WTO "the most non-transparent of international organisations", because "the vast majority of developing countries have very little real say in the WTO system", and proposes the following: 1. The processes of consultations, discussion, negotiations and decision-making in the WTO have to be made truly transparent, open, participatory and democratic. 2. Any proposals for changes to the rules, or new agreements, or new commitments on countries should be made known in their draft form to the public at least six months before decisions are taken. 3. The discussions and negotiations that are being planned and are taking place at the WTO must be made known, and all Members must be allowed to be present and participate. The practice of small informal groups making decisions on behalf of all Members must be stopped. 4. Parliaments and Parliamentarians should be kept constantly informed of proposals and developments at the WTO, and they should have the right to make policy choices regarding proposals arising in the WTO that have an effect on national policies and practices. Civil society should be given genuine opportunities to know what are the issues being discussed and the status of the discussions in the various committees and on the various issues. Civil society groups and institutions must be given genuine opportunities to express their views and to influence the outcome of policies and decisions.