Principles of WTO 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 and the WTO. 1. Non-Discrimination: It has
two major components: the most favoured nation (MFN) rule, and 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
favourable conditions under which it allows trade in a certain product type to all other WTO members.
National treatment means that imported goods should be treated no less favourably than domestically
produced goods (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 discriminating against imported
goods). School of Distance Education International Business Page 75 2. Reciprocity: It reflects both a
desire to limit the scope of free-riding that may arise because of the MEN 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 materialise. 3. Binding and Enforceable Commitments:
The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are
enumerated in a schedule (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. 4. 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
quotes and other measures used to set limits on quantities of imports. 5. Safety Values: 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 noneconomic objectives; articles
aimed at ensuring 'fair competition'; and provisions permitting intervention in trade for economic
reasons. Exceptions to the MFN principle also allow for preferential treatment of developing countries,
regional free trade areas and customs unions. WTO Agreements 1. Agreement on Agriculture This
agreement covers various issues relating to production and trade of agricultural commodities in the
international market. Broadly there are two areas of contention exists between the developing,
emerging and under developing nations in resolving various matters School of Distance Education
International Business Page 76 related to the sale of agricultural commodities in the international
market. They are Market access and domestic support. Market access consists of various trade
restrictions confronting imports and Domestic support covers issues like subsidies and other
incentivising programmes run by different national governments. 2. Agreement on Textiles and Clothing
It allows the countries to charge extra tariff or create quotas for the import of textiles and clothing. The
Agreement on Textiles and Clothing no longer exists. It is the only WTO agreement that had self-
destruction built in. 3. Agreement on Standards and safety Article 20 of the General Agreement on
Tariffs and Trade (GATT) allows governments to act on trade in order to protect human, animal or plant
life or health, provided they do not discriminate or use this as disguised protectionism. It allows
countries to set their own standards. But it also says regulations must be based on science. They should
be applied only to the extent necessary to protect human, animal or plant life or health. 4. Agreement
on TRIPs The areas covered by the TRIPS Agreement includes 1.Copyright and related rights
2.Trademarks, including service marks 3.Geographical indications 4.Industrial designs 5.Patents
6.Layout-designs (topographies) of integrated circuits 7.Undisclosed information, including trade secrets
5. The General Agreement on Trade in Services Mode 1 Services: results in Cross border supply. Eg:
Business Process Outsourcing. Mode 2 Services: consuming abroad like education in London and tourism
in Toronto. Mode 3 Services: Commercial presence. Eg: Foreign investment through Foreign Direct
investment School of Distance Education International Business Page 77 Mode 4 Services: Movement of
natural persons. Movement of persons especially professionals like Software engineers, Doctors,
Chartered Accountants from countries where salary packages are more attractive. Services represent
the fastest growing sector of the global economy and account for two thirds of global output, one third
of global employment and nearly 20% of global trade. 6. Information Technology Agreement Mobile
phones, hardware, electronic equipment’s come under this and tariff like import duty should be nil or
zero. Singapore Ministerial Conference Introduced this pluri lateral agreement (Optional agreement).
The General Agreement on Tariffs and Trade It was a free trade agreement between 23 countries that
eliminated tariffs and increased international trade. It was the first worldwide multilateral free trade
agreement. It was in effect from January 1, 1948 until January 1, 1995. It ended when it was replaced by
the more robust World Trade Organization. Purpose The purpose of GATT was to eliminate harmful
trade protectionism. That had sent global trade down 65 percent during the Great Depression. GATT
restored economic health to the world after the devastation of the depression and World War II. Three
Provisions GATT had three main provisions. The most important requirement was that each member
must confer most favoured nation status to every other member. All members must be treated equally
when it comes to tariffs. It excluded the special tariffs among members of the British Commonwealth
and customs unions. It permitted tariffs if their removal would cause serious injury to domestic
producers. Second, GATT prohibited restriction on the number of imports and exports. The exceptions If
a country needed to protect its balance of payments because its foreign exchange When a government
had a surplus of agricultural products. were: Emerging market countries that needed to protect
fledgling industries.reserves were low. School of Distance Education International Business Page 78 In
addition, countries could restrict trade for reasons of national security. These included protecting
patents, copyrights, and public morals. The third provision was added in 1965. That was because more
developing countries joined GATT, and it wished to promote them. Developed countries agreed to
eliminate tariffs on imports of developing countries to boost their economies. It was also in the stronger
countries' best interests in the long run. It would increase the number of middle-class consumers
throughout the world.