International Relations — World Trade Organisation (WTO)
1. World Trade Organisation (WTO)
BASIC INFORMATION
- Established: 1995
- Headquarters: Geneva, Switzerland
- Member Countries: 164 countries and 22 Observers
- The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations.
- WTO deals with approximately 98% of the global trade and GDP. The members need not be a fully independent state.
- It was initially established as GATT (General Agreement on Tariffs and Trade).
- The GATT was the only multilateral instrument governing international trade from 1948 until the WTO. It was established in 1995 (Marrakesh Agreement).
- The GATT was only a set of rules and multilateral agreements and lacked institutional structure. Hence was replaced as WTO.
- The highest authority of the WTO is the Ministerial Conference, which must meet at least every two years.
- In between each Ministerial Conference, the daily work is handled by three bodies:
- General Council
- Dispute Settlement Body
- The Trade Policy Review Body (TPRB)
KNOWLEDGE NUGGET
- Established: 1995 (replaced GATT)
- Headquarters: Geneva, Switzerland
- Members: 164 countries + 22 Observers
- GATT: Established in 1948; lacked institutional structure
- Highest Authority: Ministerial Conference (meets every 2 years)
- Daily Work: General Council, Dispute Settlement Body, Trade Policy Review Body
2. GATT to WTO — Evolution
| Feature | GATT | WTO |
|---|---|---|
| Established | 1948 | 1995 |
| Nature | Set of rules and multilateral agreements | Full-fledged international organization |
| Institutional Structure | Lacked institutional structure | Has permanent institutional structure |
| Scope | Only trade in goods | Trade in goods, services, and intellectual property |
| Dispute Settlement | Less effective mechanism | Strong and binding dispute settlement mechanism |
3. Major WTO Agreements
3.1 The Agreement on Agriculture (AoA)
- It came into effect in 1995.
- The AoA has three central concepts, or 'pillars':
- Domestic Support
- Market Access
- Export Subsidies
- Domestic Support refers to subsidies such as guaranteed Minimum Price or Input subsidies which are direct and product specific.
- Under this, Subsidies are categorized into 3 boxes:
- Green Box
- Amber Box
- Red Box
3.2 The General Agreement on Trade in Services (GATS)
- It was created to extend the multilateral trading system to the service sector, in the same way as the General Agreement on Tariffs and Trade (GATT) provided such a system for merchandise trade.
- Established in 1995.
3.3 The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
- It provides a minimum standard for many forms of intellectual property (IP) regulation.
- It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994.
3.4 The Agreement on the Application of Sanitary and Phytosanitary Measures (SPS)
- Also known as the SPS Agreement, it was negotiated during the Uruguay Round of GATT, and entered into force with the establishment of the WTO at the beginning of 1995.
- Under this, the WTO sets constraints on members' policies relating to:
- Food safety (bacterial contaminants, pesticides, inspection, and labelling)
- Animal and plant health (imported pests and diseases)
3.5 The Agreement on Technical Barriers to Trade (TBT)
- It was negotiated during the Uruguay Round of the GATT and entered into force with the establishment of the WTO at the end of 1994.
- The objective was to ensure that technical negotiations and standards, as well as testing and certification procedures, do not create unnecessary obstacles to trade.
MAJOR WTO AGREEMENTS AT A GLANCE
| Agreement | Year | Key Focus |
|---|---|---|
| Agreement on Agriculture (AoA) | 1995 | Domestic support, market access, export subsidies (3 pillars); Green, Amber, Red Box subsidies |
| GATS | 1995 | Trade in services (extension of GATT to services) |
| TRIPS | 1994 | Minimum standards for intellectual property regulation |
| SPS Agreement | 1995 | Food safety, animal and plant health standards |
| TBT Agreement | 1994 | Technical standards and certification procedures |
WTO SUBSIDY CLASSIFICATION
- Green Box: Non-trade distorting subsidies (e.g., environmental protection, research). Permitted.
- Amber Box: Trade-distorting subsidies (e.g., minimum support price). Subject to reduction commitments.
- Red Box: Prohibited subsidies (e.g., export subsidies). Not permitted.
4. Summary: WTO at a Glance
| Aspect | Details |
|---|---|
| Established | 1995 (Marrakesh Agreement) |
| Headquarters | Geneva, Switzerland |
| Member Countries | 164 countries + 22 Observers |
| Predecessor | GATT (General Agreement on Tariffs and Trade) — 1948 |
| Highest Authority | Ministerial Conference (meets every 2 years) |
| Daily Work Bodies | General Council, Dispute Settlement Body, Trade Policy Review Body |
| Global Trade Coverage | Approximately 98% of global trade and GDP |
Key Takeaways for UPSC
- WTO Established: 1995 | Headquarters: Geneva, Switzerland
- Members: 164 countries + 22 Observers
- Predecessor: GATT (1948) — lacked institutional structure
- Highest Authority: Ministerial Conference (meets every 2 years)
- Daily Work: General Council, Dispute Settlement Body, Trade Policy Review Body
- AoA (1995): 3 pillars — Domestic Support, Market Access, Export Subsidies
- Subsidy Boxes: Green (permitted), Amber (subject to reduction), Red (prohibited)
- GATS (1995): Trade in services
- TRIPS (1994): Minimum standards for intellectual property
- SPS (1995): Food safety, animal and plant health
- TBT (1994): Technical standards and certification procedures
High-Yield Interactive UPSC Quiz (World Trade Organisation)
Q1. The World Trade Organisation (WTO) was established in which year?
Correct Answer: C. The WTO was established in 1995 through the Marrakesh Agreement, replacing GATT (1948).
Q2. The headquarters of the WTO is located in:
Correct Answer: C. The headquarters of the WTO is located in Geneva, Switzerland.
Q3. Which agreement preceded the WTO?
Correct Answer: C. GATT (General Agreement on Tariffs and Trade) was established in 1948 and preceded the WTO. GATT lacked institutional structure.
Q4. The highest authority of the WTO is:
Correct Answer: C. The Ministerial Conference is the highest authority of the WTO and must meet at least every two years.
Q5. The Agreement on Agriculture (AoA) came into effect in which year?
Correct Answer: C. The Agreement on Agriculture (AoA) came into effect in 1995. It has three pillars: domestic support, market access, and export subsidies.
Q6. Which of the following is NOT a pillar of the Agreement on Agriculture (AoA)?
Correct Answer: C. Technical Barriers are part of the TBT Agreement, not the AoA. The three pillars of AoA are Domestic Support, Market Access, and Export Subsidies.
Q7. The agreement that deals with intellectual property regulation is:
Correct Answer: C. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) provides minimum standards for intellectual property regulation.
Q8. The SPS Agreement deals with:
Correct Answer: C. The SPS (Sanitary and Phytosanitary) Agreement sets constraints on policies relating to food safety and animal and plant health.
Q9. Which WTO agreement aims to ensure that technical standards do not create unnecessary obstacles to trade?
Correct Answer: D. The TBT (Technical Barriers to Trade) Agreement aims to ensure that technical standards, testing, and certification procedures do not create unnecessary obstacles to trade.
Q10. What percentage of global trade and GDP does the WTO deal with?
Correct Answer: C. The WTO deals with approximately 98% of global trade and GDP. Members need not be fully independent states.