GATT was an international body having its headquarters at Geneva and was founded in 1947 by 23 member countries including India. The body now comprises of 117 member countries of which around two-thirds are developing nations.
According to the approved GATT accord, a Preparatory Committe would be set up, which in turn would set up the World Trade Organization (WTO), to become operational in early 1995. The WTO will act as a permanent watchdog on the International Trade and will enjoy the status smiliar to that of UNIDO, wherein each member nation will have single voting right.
GATT was converted from a provisional agreement into a formal international organisation called World Trade Organization (WTO) with effect from January 1, 1995. WTO will serve as a single institutional framework encompassing GATT and all the result of the Uruguay Round. It will be directed by a Ministerial Conference that will meet at least once every two years and its regular business will be overseen by a General Council. The WTO is a more powerful body with enlarged fuctions than the GATT and is envisaged to play a major role in the world economic affairs.
Structure of WTO
The Ministerial Conference : The Ministerial Conference (MC) is the highest body. It is composed of the representative of the Members. The MC is the executive of WTO and responsible for carrying out the functions of the WTO. It has the authority to take decisions in any matter under the relevant Multilateral Trade Agreement (MTA). It shall meet at least once every two years.
The General Council : The General Council (GC) is an executive forum composed of representatives of all the Members. It discharges the functions of the MC during intervals between the meetings of the MC. The GC shall meet as and when appropriate and necessary. It also arranges effective co-operation with other inter-governmental organisations and non-governmental organisations which have responsibility related to those of the WTO.
The GC established its own rules of procedures and also approves the rules of procedures for the functional Councils. The is also responsible for:
1. The discharge of the responsibilities of the Dispute Settlement Body.
2. The discharge of the responsibilities of the Trade Policy Review Body.
The Functional Council shall have three Functional Councils working under its guidance and supervision. These are:
(a) Council for Trade in Goods (for overseeing the functioning of the MTA relating to Trade in Goods)
(b) Council for Trade in Services (for overseeing the functioning of the MTA relating to Trade in Services)
(c) Council for Trade Related Aspects of Intellectual Property Rights (for overseeing the functioning of MTA connected with Intellectual Property Rights and obligations)
These Councils establish their own rules of procedure subject to the approval of th GC. Membership of these Councils is open to representative of all Members. These will meet as necessary.
Subsidiary Bodies of the Councils: These Councils can establish subsidiary Bodies which establish their respective rules of procedure subject to the approval of their respctive Councils.
Functional Committees under MC: The Ministerial Conference (MC) establishes thre functional Committees for discharge of functions assigned to them under MTAs. These committees are:
(a) Committee on Trade and Development.
(b) Committee on Balance of Payments Restrictions.
(c) Committee on Budget, Finance and Administration.
These committees also discharge functions specifically assigned to them by the General Council. These are open to representatives of all members.
Disputes settlement body: Under the WTO, there is a Dispute Settlement Body (DSB) which is the custodian of the Dispute Settlement System. The DSB has been empowered to establish panels, constitute Appellate Body, adopt panel and Appellate Body Reports, exercise surveillance for compliance with rules and recommendations and authorize retaliatory measures in cases of non-implementation of recommenda-tion. The General Council is responsible for the discharge of responsibilites of the Dispute Settlement Body.
Features of WTO
- The WTO is the main organ of implementing the Multilateral Trade Agreements.
- The WTO is global in its membership. Its prospective membership is already around 150 countries and with many other considering accession.
- It is the forum for negotiations among its member. In this forum, the member-nations discuss issues related to the MTAs and associated legal instruments. It is also the forum for negotiations on terms of the Plurilateral Trade Agreements (PTAs). In fact, it is the third economic pillar of world-wide dimensions along with the IMF and the World Bank.
- It has a far wider scope than its predecessor GATT, bringing into the multilateral trade system, for the first time, trade in service, intellectual property protection and investment.
- It is a full fledged international organisation in its own right.
- It administers a unified package of agreements to which all members are committed.
- The decision-making under the WTO is carried out by consensus where a consensus is not arrived at the issue shall be decided by voting. Each member has one vote.
- The WTO has legal personality. Members shall endow it with such legal capacity, privileges and immunities as are necessary for the exercise of its functions.
- The representatives of the members and all officials of the WTO enjoy International privileges and immunities.
Function of WTO
The WTO has the following specific functions:
- The WTO shall facilitate the implementation, administration and operation and further the objectives of the Multilateral Trade Agreements and shall also provide the framework for the implementation, administration and operation of Plurilateral Trade Agreements.
- The WTO shall provide the forum for negotiations among its members concerning their multilateral trade relations in matters dealt with under the Agreements.
- The WTO shall administer the ‘Understanding on Rules and Procedures governing the Settlement Disputes’.
- The WTO shall administer the ‘Trade Review Machanism’.
- With a view to achieving greater coherence in global economic policy making, the
WTO shall co-operate, as appropriate, with the IMF and IBRD and its affiliated agencies.
Area of relevance in the Indian context
India being a member of WTO, the GATT accord has its impact on many areas in the Indian context. The major impact would be on the agricultural sector, textile and pharmaceutical industries.
Agricultural Sector
The Dunkel proposal, as accepted by the member countries has its impact on four different areas of agricultural namely,
1. Reduction of domestic support in the form of subsidies.
2. Minimum level of import content in total consumption.
3. Possibility fo disbading of Public Distribution System.
4. Extension of Intellectual Property Protection on agriculture and introduction of seed patenting.
Reduction of Farm Subsidies: According to the proposal, in the developing countries, the value subsidy commitment should not be more than 10% of the value of gross agricultural output. In India, the Govt. offers minimum support price to 20 agricultural products and the subsidy provided in each case in less than 10%. The ratio currently stands at 5.2% only. Further , according to the proposal, this 10% norm excludes subsidies to the low income and resource poor farmers. Farmers having less than 2.5 hectares are defined as low income and resource farmers in the draft proposal. In India, the low income farmers (as defined in the draft) account for around 40% of the total farmers. Hence, this provision may not result in a significant change in Government’s policy in the foreseable future.
Provision of Minimum Access to Imports: The import content in the total consumption, according to the draft, would have to be at least 3% in the first year of enforcement of Uruguay agreement. This limit would go up to 5% by the end of sixth year. However, according to the draft, countries having Balance of Payments (BOP) problems are exempted from the commitment. India, being classified as the country having the BOP problem, is exempted from this clause. Hence this area too is unlikely to have a major impact on the agricultural policy of the Government.
Disbanding Public Distribution System (PDS): The GATT accord necessitates the member countries to procure the agricultural product at market price to sell them at market price. The Government, however, maintains that the PDS is meant to help the poor consumer and not the farmer. The question of undue influence on the PDS system, therefore, does not arise.
Seed Patenting: The agreement on Trade Related Intellectual Property Rigths (TRIPs) argues that as far as the plant varieteis are concerned (which include seeds), they must be protected either by a patent. There is no obligation under TRIPs that India should provide patent protection for seeds. Patent laws are national in jurisdiction and even if the law of some other country permits patenting of seeds, that would not be valid in India. However, it was obligatory for India to enact a system for protection of plat varieties, namely, Plant Breeders Right (PBR) system by 2000. Under PBR, India is free to provide the ‘farmer’s privilege’ and ‘researcher’s privilege’. Farmers will have the privilege to use their farm-saved seed for growing subsequent crops on their own land or leased land. As long as the farmer remains a grain producer and does not turn himself into a commercial seed producer of these protected varieties, his freedom to use farm-saved seed will not be affected by PBR system. Similarly researcher’s privilege’ would permit the use of one protect variety to breed another new variety without any specific permission of the original plant breeder.
Textile Industry
The Multi-Fibre Arrangement (MFA), in place since 1953, groups eight importers (Austria, Canada, European Community, Finland, Norway, USA, Japan and Switzerland) and UDCs exporters. Except for Japan and Switzerland, all other countries apply strict restrictions on the imports from UDCs through bilaterally agreed quantitative restraints or unilaterally sponsored restraints.
The MFA, according to the GATT proposal would be phased out over a period of 10 years. The 10-year period would be broken into three stages of 3, 4, and 3 years respectively. During this transitional period, the negotiated quota increase would ensure a growth of at least 16%, 25% and 27% in the three stages respectively.The GATT accord, therefore, would have a positive impact on the textile industry in the long run while the growth during the transitional period would be fair enough.
Pharmaceutical Industry
The Indian drugs and pharmaceutical industry has great apprehensions and feels threatened by the switch-over from the present product patenting to process patenting under the new GATT accord.
The threat, apparently, is with regard to only the new drugs that will come under patent. Already over 85% of essential drugs are ‘off-patent’ and the rest too would to off-patent in ten years time. This ultimately boils down to one thing; the need for additional focus to be paid on R&D activities for development on our own with a view to reduce the overall cost instead of depending on the borrowed process.
As far as the drug prices are concerned, the Govt. of India maintains that the nature and extent of raise would be influuenced mainly be the demand-supply factors in the economy and not by changes in the patent law. Further, the share of patented drug, at present, is only 15% of total drug output and the price increase across the board is therefore, unlikely.
Achievements
In the short span that the WTO has been in existence it has achieved the following:
- Greater market orientation has become the general rule.
- Traiff based protection has become the rule rather than the exception.
- The use of restrictive measures for BOP reason has declined markedly.
- Services trade has been brought into the multilateral system and many countries are, as in goods, opening their markets for trade and investment either unilaterally or through regional or multilateral negotiations.
- Many UDCs have undergone radical trade, exchange and domestic reforms which have improved the efficiency of resource use, opened new investment opportunities and thus promoted economic growth.
- The trade policy review mechanism has created a process of continuous monitoring of trade policy developments that, by promoting greater transparency, has assisted in the process of liberalization and reforms.
Limitations
The WTO, however, has still to make any progress on the following issues:
- The trade reform is not complete in many countries; many traiff peaks remain, negotiations are still proceeding in many areas, negotiations on many issues have been postponed.
- There seem to have been at least some reversals in the overall liberalization process in some developing countries; for example, increasing of anti-dumping measures, increasing of traiff and restrictive investment measures by some countries have been reported.
- Concerns have been raised that the combination of globalization and technological change creates a premium on high skill than low-skill with growing divisions.
- Not all WTO members are equally integrated in the multilateral system.
