FAQ
Q: What do you mean by World Trade Organization (WTO)?
A: The World Trade Organization (www.wto.org) successor to GATT is the only international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The World Trade Organization (WTO) deals with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible. The World Trade Organization established on January 01, 1995 with 127 member countries has now 158 member countries and is the successor to the General Agreement on Tariffs and Trade (GATT) which had been performing a similar role since January 01, 1948. INDIA is a founding member of the GATT as well as the WTO.
| Principles of WTO | |
| · Non-discrimination in trade among nations | |
| · Protection through tariffs only | |
| · Maintaining predictability through binding of tariffs | |
| · Progressive liberalization of trade through negotiations | |
| · Promoting fair competition in trade in the world market | |
| · Encouraging development and economic reforms among members | |
Q: What is trade without discrimination?
A: This principle of non-discrimination in trade is embodied in provisions relating to:
(i) Most Favoured Nation (MFN) Treatment
(ii) National Treatment
Q: What is Most Favoured Nation (MFN) treatment?
A: The Most Favoured Nation (MFN) principle requires that every WTO member will treat all its trading partners equally without any prejudice and discrimination. When a member country grants some special favour or concession to another country, it will have to extend the same favourable / concessional treatment to all other WTO members. The basic objective of the MFN principle is to enhance 'equality of treatment'.
Q: What is national treatment principle?
A: It lays down that imported products are to be treated at par with similar products in the domestic market, once these have crossed the customs border. However, charging customs duty on imports is not a violation of national treatment.
Q: How can WTO encourage free trade?
A: The WTO encourages the process of trade liberalisation through free trade, gradually reducing barriers to international trade. This is achieved through multilateral trade negotiations among member countries. Progressive reduction of barriers (both tariff and non-tariff) leads to “free” trade. The WTO does not seek unrestrained free trade.
Q: How does the WTO promote fair competition?
A: The WTO lays down rules that favour fair competition by discouraging unfair trade practices such as dumping and export subsidies.
Q: How does the WTO recognize special needs of developing and the least developed countries?
A: The WTO recognises the special needs and problems of developing and the least developed countries in different parts of the world. Special and Differential Treatment (S&DT) for these countries is incorporated in the WTO laws and rules and is usually achieved by giving the developing and the least developed countries longer implementation periods and greater flexibility in matters of compliance with the WTO.
Q:What are the differences between the GATT 1947 and the WTO Agreement regarding trade in goods?
A: The GATT was a multilateral agreement for regulating international trade in goods The GATT as an organisation no longer exists and has been replaced by the WTO. But the GATT as an international agreement still exists in a modified form of its original version and incorporating all the amendments that were made from time to time till the creation of the WTO in 1995.
The main differences between the GATT and the WTO are:
| GATT | WTO |
|
Provisional agreement |
Permanent Agreement |
|
Not ratified by member’s parliament |
Ratified by member’s parliament |
|
Lacks Legal Basis |
Legal Basis |
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No dispute settlement mechanism |
A well defined dispute settlement mechanism exists. |
|
Signatories to the GATT called ‘contracting parties’ |
Has got ‘Members’ |
|
Dealt with trade in Goods only |
Covers goods, services and intellectual property |
Q: What are the major agreements in WTO?
A: A number of agreements are contained in the WTO. The major agreements are
1. Multilateral Trade Agreements on Trade in Goods
· GATT and understanding on specific Articles thereof
· Agriculture
· Sanitary and Phytosanitary Measures
· Technical Barriers to trade
· Textiles and Clothing
· TRIMS
· Anti-dumping
· Customs valuation.
· Preshipment Inspection
· Rules of Origin
· Import Licensing
· Subsidies and Countervailing Measures
· Safeguards
· GATS
· Trade Policy Review Mechanism
2. Dispute Settlement Undertaking
3. Trade Policy Review Mechanism
4. Plurilateral Trade Agreements
· Agreement on Trade in Civil Aircraft
· Agreement of Government Procurement
· International Dairy Agreement (agreement terminated during 1997)
· International Bovine Meat Agreement (agreement terminated during 1997)
.
Q: What are quantitative restrictions ( QR )?
A: The quantitative restrictions are limits or quotas imposed by importing / exporting countries on the amount of particular products that can be imported or exported from one country to another during a given period. Article XI of GATT 1994 prohibits the use of quantitative restrictions (though there are certain exceptions) to this rule. In certain circumstances, however, quotas, export or import licenses or other similar measures are allowed, e.g.:
(a) QRs temporarily imposed for prevention or relief of critical food shortages
(b) QRs necessary to the application of standards or regulations for goods, classification, grading or making of commodities in international trade.
(c) Import restrictions on any agricultural or fisheries products necessary to enforcement – governmental measures which operate to achieve specified purposes.
Q: What are Regional Trade Agreements (RTAs)?
A: Regional Trade Agreements are arrangements entered into by a group of WTO Member countries or any two of them, extending preferential concessions to its members. This is a deviation explicitly allowed from the principles of multilateral trading system of the WTO. Article XXIV of GATT 1994 recognises the purpose of RTAs such as customs unions and free trade areas to facilitate trade between constituent territories and countries, and not to raise barriers to the trade with other territories.
Members have the obligation to notify the RTAs to WTO and should prescribe to the broad principles provided for them under GATT 1994.
Q: What is called Agreement on Agriculture (AOA)?
A: Agreement on Agriculture (AoA) a major agreement in the WTO was negotiated in the 1986–94 Uruguay Round and is a significant first step towards fairer competition and a less distorted sector. WTO member governments agreed to improve market access and reduce trade-distorting subsidies in agriculture. In general, these commitments were phased in over a six years from 1995 (10 years for developing countries). The objective of the agreement is:-
(1) To establish a fair and market oriented agricultural trading system.
(2) To provide for substantial and progressive reduction in agricultural support and export subsidies with a view to remove distortion in the world market.
Q: What are the three pillars of AoA?
A: The three pillars of AoA are:
(1) Market access
(2) Domestic support
(3) Export subsidies
Q: What is called Aggregate Measures of Support ( AMS )?
A: Aggregate Measurement of Support (AMS) refers to sum of the annual level of support (expressed in monetary terms) extended to the producers of the basic agricultural products. It also includes the non-product-specific support provided to agricultural producers in general.
Q: What are different kinds of domestic support?
A: Various kinds of domestic supports provided by the governments are classified in the form of boxes.
“Amber box”subsidies are domestic support initiatives considered to distort production and trade.Such support is defined in Article 6 of the AoA as all domestic support except those not subject to reduction commitments.
“Blue Box”subsidies are the subsidies that cause distortion to trade. Any support that would normally be in the amber box, is placed in the blue box if the support also requires farmers to limit production.
“Green box”subsidies are those subsidies that do not distort trade or cause minimal distortion. They tend to be programmes and activities that are not targeted at particular products, and include direct income support for farmers and growers that are not related to present production levels. They also include environmental protection and regional growth programmes. "Green Box" subsidies are therefore, permitted without limitations, provided they comply with the policy-specific criteria.
Q: What are the reductions in tariffs agreed in Uruguay Round?
A: Commitments to reduce tariffs, domestic support, and export subsidies as agreed in the Uruguay Round negotiations are set out in AOA.
|
UruguayRound Reduction Commitments The reductions in agricultural subsidies and protection agreed in the Uruguay Round. |
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Developed countries |
Developing countries 1995–2004 |
|
I Tariffs |
|
|
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Average cut for all agricultural products |
–36% |
–24% |
|
minimum cut per product |
–15% |
–10% |
|
II Domestic support |
|
|
|
Total AMS cuts for sector |
–20% |
–13% |
|
III Exports |
|
|
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Value of subsidies |
–36% |
–24% |
|
Least developed countries do not have to make commitments to reduce tariffs or subsidies. The base level for tariff cuts was the bound rate before 1 January 1995; or, for unbound tariffs, the actual rate charged in September 1986 when the Uruguay Round began. |
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Q: What are Non Tariff Measures (NTMs)?
A: Any measure other than import tax or import duty levied by one country on its imports from a foreign country to restrict the import can be called Non Tariff Measure. The following are examples of NTMs.
Technical measures, internal taxes or charges, customs rules and procedures, competition related restrictions on market access, Quantitative import restrictions, Administration procedures, Public procurement practices, Subsidies and related government supports, Investment restrictions or requirements, Transport regulations or costs, Restrictions of services, Local marketing regulations etc.
Q: What is Agreement on Sanitary and Phytosanitary (SPS) Measures?
A: The Agreement on the Application of Sanitary and Phytosanitary Measures is one of the major agreements in WTO. It contains a framework of the basic rules and regulations for food safety, animal and plant health standards which directly or indirectly affect international trade. It allows countries to set their own standards and criteria based on scientific principles. Sanitary and phytosanitary measures seeks to:
(i) Protect life, human or animal from risks arising from additives,contaminants, toxins or disease- causing organisms
in their food.
(ii) Protect human life from plant or animal-carried diseases
(iii) Protect animal or plant life from pests, diseases, or disease-causing elements by utilising all possible available
measures
(iv) Prevent damage to a country from the entry, or spread of diseases.
Q: What is the objective of SPS agreement?
A: The establishment of a multilateral framework of rules and disciplines to guide the development, adoption and enforcement of sanitary and phytosanitary measures in a harmonised way so as to minimise their negative effects on the trade.
Q: What are the principles governing application of SPS measures?
A: The SPS measures are required to follow these principles:
i) Measures are to be based on scientific principles and should not be inconsistent with the provisions of the SPS agreement.
ii) Measures should not arbitrarily or unjustifiably discriminate between/among members where identical or similar conditions exist.
iii) Measures should not be applied in a way which would constitute a disguised restriction to international trade.
Q: Are there any standards set by SPS Agreement?
A: SPSAgreementby itself has not set any standards. Measures based on international standards / guidelines are presumed to be consistent with SPS Agreement.
This Agreement recognizes standards developed by the Codex Alimentarius Commission, the International Office of Epizootics (OIE), and the International Plant Protection Convention (IPPC). The member countries are required within the limits of their resources, to promote within these organisation the development and periodic review of standards, guidelines and recommendations with respect to all aspects of sanitary and phytosanitary measures in the relevant international organizations and their subsidiary bodies.
Q: What is to be done to ensure that the procedures of control, inspections and approval etc are not inconsistent with the
provisions of the SPS Agreement?
A: The members countries of the agreement are to observe the provisions of Annexure C of the SPS agreement in the operation, control, inspection and approval procedures, including national systems for approving the use of additives or for establishing tolerances for contaminants in foods, beverages or feedstuffs, and otherwise assure that their procedures are not inconsistent with the provisions of this agreement.
Q: What is Technical Barrier to Trade (TBT)?
A: The TBT Agreement covers all technical regulations, standards and conformity assessment procedures regardless of their objectives, except when these are sanitary or phytosanitary measures as defined by Annexure A of the SPS Agreement.
Q: What are the differences between SPS and TBT?
A: SPS measures typically deal with additives, contaminants and poisonous substances in food or drink, residues of veterinary drugs, processing methods with implications for food safety, labelling requirements directly related to food safety, plant/animal quarantine, declarations of areas free from specific pests or diseases, other sanitary requirements for imports( eg. on imported pallets used to transport animals) etc.
TBT measures typically deal with composition of certain processed foods, labeling of food, drink and drugs, quality and packaging requirements for fresh food, packaging and labelling for dangerous chemicals and toxic substances( eg. statutory warning in cigarette packets in India), textiles and garments product/product description, safety of toys etc.
Examples of SPS and TBT
|
Fruit |
Regulation on treatment of imported fruit to prevent pests spreading |
SPS
|
|
Regulation on quality, grading and labeling of imported fruit |
TBT |
|
|
Bottled water- specification for the bottle |
Use materials that are safe for human health |
SPS |
|
Requirements: no residues of disinfectants so that water is not contaminated |
SPS |
|
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Permitted size to ensure standard volumes |
TBT |
|
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Permitted shapes to allow stacking and displaying |
TBT |
|
|
Cigarette packet labeling |
Government health warning “Smoking is injurious to health” or “Smoking causes cancer”. The label’s objective is health but it is not about food ,so it is not SPS |
TBT |
Q: What is dumping?
A: Dumping is the sale of an exported product in a foreign market at a price below its 'normal value'. This definition entails a comparison between two prices, the export price and the 'normal value', in order to determine if a product is dumped.
(Normal value is usually the domestic price of the product in the exporting country. In the absence of such domestic price for the purpose of comparison, normal value may be calculated on the basis of the price of the product when sold to a third country, or the cost of production of the product in the country of the origin plus a reasonable addition for selling cost and profits).
The prices charged by the producers in the importing country are not relevant in determining whether an imported product is dumped. However, the question of price undercutting is among the relevant factors to be considered in determining whether the domestic industry is injured by dumped imports. (Price undercutting is the sale of a product for export at a price below that charged by domestic producers in the importing country.)
Q: What are intellectual property rights?
A: Intellectual property rights can be defined as 'the rights given to people over the creations of their minds'. This confers the creator of creations of mind an exclusive right over the use of his creations for a certain period of time. Intellectual property rights, is a broad, generic term used to describe different kinds of monopoly rights granted by the state to an inventor/author or any other creative individual for the protection of certain intangible creation ideas and works of art, etc.
These rights are essentially negative rights to prevent others from doing something territorially and internationally.
These rights are generally divided into two major categories:
(i) Copyright: are rights granted to authors of literary and artistic works, authors of computer software and rights of performers, producers of phonograms and broadcasting organisations etc. The main purpose of protection of copyright and related rights is to encourage and reward the creative work of the people.
(ii) Industrial property: This includes
(a) the protection of distinctive signs such as trademarks and geographical indications.
(b patenting of inventions, industrial designs and trade secrets. (These are industrial property rights primarily used to stimulate innovation, design and the creation of technology)
Q: What are the categories of Intellectual Property referred to under the TRIPs agreement?
A: According to the TRIPS agreement, "intellectual property" refers to all categories of intellectual property that are the subject of the agreement. It includes,
(i) Trade Marks
(ii) Patents.
(iii) Integrated Circuit Design
(iv) Copyrights
(v) Industrial Designs.
(vi) Geographical Indications
(vii) Undisclosed information
Q: What does WIPO stands for?
A: The World Intellectual Property Organization (WIPO) was established on 14 July 1967 in Geneva and administers a number of international treaties in the area of intellectual property, such as the Paris and Berne Conventions.
WIPO also aims to ensure administrative cooperation among the intellectual property unions created by the Paris and Berne Conventions and sub-treaties concluded by the members of the Paris Union. The WIPO also promotes development cooperation for developing countries through advice, training and furnishing of documents. There is an agreement for cooperation between the WIPO and the WTO.
Q: What is a Geographical Indication?
A: A Geographical indication (GI) is an indication which identifies goods having certain special qualities or characteristics or reputation which are attributable to their geographical origin. A GI is basically a notice that a good or service originates in a given geographical area.
Q: How can a Geographical Indication be protected?
A: Different countries have different systems of protecting geographical indications. Somecountries extend protection to geographical indications through their trade mark laws, consumer protection laws, and competition law, some through separate legislations and some through a registration system, as in the case with the Indian law. Other WTO member countries have the obligation to protect a GI only if that is protected in its home country.
Q: How can we protect plant varieties?
A: TRIPs agreement exclude from patentability 'plants and animals (other than micro-organisms), and essentially biological processes for the production of plants or animals other than non-biological and microbiological processes’. But the agreement demands that members must provide for the protection of plant varieties, either by patents or by a ‘sue generis’ system or by combination of both. India has its own special system to protect the plants. It is called the ‘Protection of Plant Varieties and Farmer’s Rights Act 2001”( PPVFR Act 2001).
