The World Trade Organisation (WTO) is an intergovernmental organization that regulates and supports international trade. Governments use the organization to create, update, and enforce international trade rules. A detailed explanation of WTO is provided in this article. It is a crucial topic in the Economy syllabus for the UPSC Examination. The article below briefs the World Trade Organisation followed by detailed explanations.

What is the World Trade Organisation (WTO)?

• The World Trade Organisation (WTO) is the sole international organization that deals with international trade rules.
• The WTO agreements, negotiated and signed by the majority of the world's trading nations and recognized by their parliaments, are at its heart.
• The World Trade Organisation is headquartered in Geneva, Switzerland.
• The Ministerial Conference, which is made up of all member states and meets twice a year, is the highest decision-making body of the organization.
• The World Trade Organisation (WTO) has 164 countries (160 UN countries, EU, Hong Kong, Macau, and Taiwan).

History

• From the start of the Silk Road through the founding of the General Agreement on Tariffs and Trade (GATT) and the birth of the World Trade Organisation (WTO), trade has played an important role in encouraging economic development and harmonious relations between states.
• The General Agreement on Tariffs and Trade (GATT) dates back to the 1944 Bretton Woods Conference, which established the International Monetary Fund (IMF) and the World Bank, as well as laid the groundwork for the post-World War II financial system.
• The conference delegates also proposed the creation of a complementary institution known as the International Trade Organisation (ITO), which they saw as the system's third leg.
• The UN Conference on Trade and Employment in Havana, Cuba, in 1948 completed a draft charter for the ITO, known as the Havana Charter, that would have established broad laws covering trade, investment, services, and business and employment practices.
• The Havana Charter was never ratified by the United States Senate, and as a result, it never came into law. As a result, the ITO never got off the ground.
• Meanwhile, the GATT, signed by 23 countries in Geneva in 1947, entered into force on January 1, 1948, with the following goals: to phase out the use of import quotas and reduce tariffs on merchandise trade. From 1948 to 1995, the GATT was the only multilateral instrument (not an institution) governing international trade.
• Despite its structural flaws, the GATT served as a de facto international organization, sponsoring eight rounds of negotiations.
• As a result, from 1948 until the WTO was founded in 1995, the GATT was the only multilateral instrument governing international commerce.
• From 1987 to 1994, the Uruguay Round resulted in the Marrakesh Agreement, which founded the World Trade Organisation (WTO).
• The WTO includes the GATT's principles and provides a more long-term institutional structure for implementing and expanding them.
• The GATT was signed in 1947, and it is now known as the GATT 1947. In 1996, the GATT 1947 came to an end, and the WTO incorporated its rules into the GATT 1994.
• The GATT of 1994 is an international pact that all WTO members are bound by. It is solely concerned with goods commerce.

*To know more about this, click the link Evolution of WTO

Primary Goal

The World Commerce Organisation (WTO) is an international organization whose main goal is to open up trade for the benefit of everyone.

Objectives

The WTO has six main objectives:

1. to establish and enforce international trade rules,
2. to provide a forum for negotiating and monitoring further trade liberalization,
3. to resolve trade disputes,
4. to improve decision-making transparency,
5. to collaborate with other major international economic institutions involved in global economic management, and
6. to assist developing countries in fully benefiting from the global trading system.

Although the GATT shares these principles, the WTO has followed them more completely in practice.

*To know more about this, click the link Objectives of WTO

Structure

• The Ministerial Conference, which must meet at least every two years, is the WTO's highest authority.
• The daily work is handled between Ministerial Conferences by three bodies whose membership is the same; the only difference is the terms of reference under which each body is created.
  • The General Council
  • The Dispute Settlement Body
  • The Trade Policy Review Body
• The General Council is the highest governing body of the United Nations.

*To know more about this, click the link Structure of WTO

Agreements Under WTO

• Goods, services, and intellectual property are all covered by WTO agreements.
• They lay forth the liberalization principles as well as the authorized exceptions.
• Individual country obligations to cut customs duties and other trade obstacles, as well as to open and maintain free services markets, are among them.
• They provide methods for resolving disputes.
• They recommend that developing countries receive preferential consideration.
• They compel states to make their trade policies open by alerting the WTO about laws in place and actions enacted, as well as reporting on nations' trade policies on a regular basis by the secretariat.

*To know more about this, click the link Agreements under WTO

Functioning of WTO

• The WTO's main function is to make trade flow more smoothly, freely, and reliably. It accomplishes this by the following
  • Administers trade agreements
  • Acts as a forum for trade negotiations
  • Settles trade disputes
  • Reviews national trade policies
  • Builds the trade capacity of developing economies
  • Cooperation with other international organizations

*To know more about this, click the link Functioning of WTO

Dispute Settlement under WTO

• One of the WTO's main responsibilities is to settle trade disputes.
• A dispute occurs when one member nation adopts a trade policy measure or takes some action that one or more other countries consider to be a violation of WTO agreements or a failure to meet responsibilities.
• By joining the WTO, member countries have agreed to use the multilateral system of settling disputes rather than taking unilateral action if they believe fellow members are violating trade rules.
• This entails adhering to agreed-upon procedures—the Dispute Settlement Understanding—and respecting judgments, particularly those of the Dispute Settlement Board (DSB), the WTO organ responsible for dispute adjudication.
• The World Trade Organization (WTO) has one of the most active international dispute-resolution processes in the world.
• Since 1995, the World Trade Organization (WTO) has heard 610 disputes and delivered over 350 judgments.

*To know more about this, click the link Dispute Settlement under WTO

Doha Development Agenda

• In 2001, a ministerial-level conference in Doha, Qatar launched the Doha Agenda.
• The goal was to prioritize the needs of developing countries.
• The summit was primarily convened to address the problems of emerging countries.
• Trade facilitation, services, rules of origin, and dispute resolution are among the primary topics explored.
• The issue of differentiated and special treatment for developing countries was also raised as a serious concern.
• It is the most recent round of trade negotiations among WTO members.

*To know more about this, click the link Doha Development Agenda

WTO Ministerial Conference

• The WTO's Ministerial Conference is the organization's top decision-making body.
• Trade ministers and other top officials from the organization's 164 members attend this meeting.
• The WTO's founding agreement, the Marrakesh Agreement, mandates that the meeting be held every two years.
• In 1996, Singapore hosted the first Ministerial Conference (MC1).

*To know more about this, click the link WTO Ministerial Conference.

WTO and India

• India was a founding member of the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organisation (WTO) in 1947.
• India's participation in a more rule-based system of international trade regulation will assure greater stability and predictability, which will lead to increased commerce and prosperity.
• Services exports account for 40% of India's overall commodities and services exports. The services sector accounts for more than 55 percent of India's GDP.
• Around 142 million people are employed in the sector (domestic and exports), accounting for 28 percent of the country's workforce.
• IT and IT-enabled services, travel and transportation, and financial services account for the majority of India's exports.
• The United States (33 percent), the European Union (15 percent), and other rich countries are the most popular destinations.
• India has a clear interest in the liberalization of services trade and wants industrialized countries to grant commercially meaningful access.
• India has liberalized its services trade system across the board since the Uruguay Round.
• It's vital to ensure food and livelihood security, especially in a big agrarian economy like India.
• India has been lobbying the WTO for a long-term solution to public stockholding subsidies.
• An interim agreement (a peace clause) on "public stockholding" continued exceptions that allow developing countries to stockpile agricultural products to protect against food shortages at the 2013 Ministerial Conference (MC9) in Bali.
• India is a big supporter of giving geographical indicators for products like Basmati rice, Darjeeling tea, and Alphonso mangoes the same level of protection as wines and spirits under the Trade-related Aspects of Intellectual Property Rights (TRIPS) accord.
• Non-trade topics such as labor standards, environmental protection, human rights, investment laws, and competition policy have been pushed into WTO agreements by developed countries.
• India opposes any inclusion of non-trade issues that are aimed at enforcing protectionist measures in the long run (based on non-trade issues, developed countries such as the United States and the European Union are attempting to ban the imports of certain goods such as textiles, processed foods, and so on), particularly against developing countries.

Significance

• In a nutshell, the World Trade Agency (WTO) is the only international organization responsible for enforcing global trade regulations.
• It keeps trade flowing as smoothly, predictably, and freely as possible.

Conclusion

Today, the world is seeing protectionism, trade wars (such as between the United States and China), and Brexit, all of which are putting pressure on the global economy. The WTO's future role is critical in preserving the global liberalized economic system that has evolved after the end of World War II. At a time when countries are threatening to leave the WTO, causing it to become dysfunctional, India and other growing economies such as Brazil, South Africa, and others can provide a strong foundation for a successful WTO while safeguarding the interests of developing countries.

FAQs

Q1: What is the World Trade Organisation (WTO)?

Q2: When was the WTO established?

Q3: What is the primary role of the WTO?

Q4: How many member countries are part of the WTO?

Q5: What is the significance of the Doha Development Round?

MCQs

1. When was the WTO officially established?

A) 1947

B) 1985

C) 1995

D) 2001

2. Which agreement preceded the WTO?

A) Bretton Woods Agreement

B) General Agreement on Tariffs and Trade (GATT)

C) UNCTAD

D) NAFTA

3. What is the primary goal of the Doha Development Round?

A) Promote digital trade

B) Eliminate industrial tariffs

C) Improve trade conditions for developing countries

D) Strengthen bilateral trade agreements

4. How many member countries are currently part of the WTO?

A) 154

B) 160

C) 164

D) 172

5. Which of the following is not a function of the WTO?

A) Monitor trade policies

B) Resolve trade disputes

C) Impose economic sanctions

D) Facilitate trade negotiations

GS Mains Questions and Model Answers

Q1: Discuss the role of the WTO in promoting global trade and resolving disputes.

Answer: The WTO plays a crucial role in promoting global trade by setting rules for international commerce, reducing trade barriers, and fostering transparency. Through its dispute resolution mechanism, it provides a forum for member countries to address trade conflicts. The WTO ensures predictable trade policies, which facilitate smoother economic relations. However, its effectiveness has been questioned due to prolonged negotiations, such as the Doha Round, and rising protectionism among member states.

Q2: Examine the challenges faced by developing countries within the WTO framework.

Answer: Developing countries face several challenges in the WTO, including limited negotiating power and difficulty in meeting complex trade rules. Agricultural subsidies provided by developed nations remain a major concern, as they hinder fair competition. Additionally, developing countries struggle with access to markets and the implementation of trade-related technical standards. Despite the WTO’s efforts to address these issues, such as through the Doha Development Round, progress has been slow and uneven.

Q3: Evaluate the impact of the Doha Development Round on the global trading system.

Answer: The Doha Development Round was initiated with the objective of addressing trade disparities, especially those affecting developing countries. It aimed to reduce agricultural subsidies, improve market access, and reform global trade rules. However, the negotiations have been stalled due to disagreements between developed and developing nations. While the Doha agenda has highlighted the need for reforms, the lack of consensus has diminished its impact on the global trading system, raising questions about the WTO’s relevance.

Previous Year Questions on  WTO

1. UPSC CSE 2019

Question: Discuss the significance of the WTO’s dispute settlement mechanism in the context of global trade.

Answer: The WTO’s dispute settlement mechanism is a key component of the organization’s framework, ensuring that trade disputes are resolved through legal means rather than unilateral actions. It provides member countries with a structured process to raise grievances, promotes transparency, and strengthens compliance with international trade rules. By offering binding rulings, the mechanism helps maintain the predictability and stability of global trade. However, it has faced criticism due to delays and a backlog of cases. The current impasse in appointing judges to the Appellate Body has further weakened the system, raising concerns about its effectiveness in handling complex disputes.

2. UPSC CSE 2021

Question: Analyze the relevance of the WTO in the face of rising protectionism and trade wars.

Answer: The WTO plays a pivotal role in promoting free trade, but its relevance is being challenged by the rise of protectionism and trade wars. Countries are increasingly resorting to tariffs and other barriers to protect domestic industries, undermining the principles of multilateralism. The trade war between the US and China is a prime example of how unilateral actions can disrupt global trade. The WTO’s limited ability to address such conflicts has raised questions about its effectiveness. Nonetheless, the organization remains vital for providing a forum for negotiations and dispute resolution, though reforms are essential to adapt it to current economic realities.