Understanding WTO
 
The World Trade Organization (WTO) was created in January 1995 as a result of the final round of the General Agreement on Tariffs and Trade (GATT), otherwise known as the Uruguay round with the participation of 111 countries. GATT was an international agreement formulated in 1947 to facilitate multilateral trade negotiations. It was supported by an ad hoc international agency which was set up later.

One of the main objectives and in fact its main achievement has been the opening up of markets. GATT was organized as a series of trade talks, or rounds, and the Uruguay round (the 8th round) included non-tariff barriers, trade in goods (particularly agricultural goods) and trade in services. Earlier trade rounds dealt mainly with the reduction of tariffs.

The WTO which replaced GATT is a full fledged international Organization with a permanent secretariat administering three major agreements, including the GATT.
 

WTO
International Organization
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Agreements
• GATT
 General Agreement on Trade and Tariff
• GATS
 General Agreement on Trade in Service
• TRIPS
 Agreement on Trade Related Intellectual Property Rights

International trade in goods arise where a product is transported from one country to another. This is an easy idea to understand. International trade in services is a little more difficult to conceptualize as it refers to the buying and selling of services between different countries. The rules that apply to one type of service may not be applicable to another type of service. Banks, shipping lines, airlines, accounting firms, telecommunication firms are all engaged in serving overseas markets. The diversity of services offered are recognized in that annexes to the GATS deal with different services.

The General Agreement on Trade in Services (GATS) is the first set of multilateral, legally enforceable rules covering international trade in services and has several components.

• General principles and obligations of countries, in the main text
• Rules for specific sectors in the annexes
• Individual countries specific commitments to provide access to their markets
• Lists where countries are temporarily not applying the “most favoured nation principle”

Most favoured nation treatment (MFN)
Favour one, favour all. MFN means treating one’s trading partners equally. Under GATS, if a country allows foreign competition in a sector, equal opportunities in that sector should be given to service providers from all other WTO members. MFN applies to all services, but some special temporary exemptions have been allowed.

 
MFN exemptions: temporary and one-off
WTO members have also made separate lists of exception to the MFN principle of non-discrimination. When GATS came into force, a number of countries already had preferential agreements in services that they had signed with trading partners, either bi-laterally or in small groups. WTO members felt it was necessary to maintain these preferences temporarily. They gave themselves the rights to continue giving more favourable treatment to particular countries in particular service activities by listing MFN exemptions alongside their first set of commitments. In order to protect the general MFN principle, the exemptions could only be made once; nothing can be added to the lists. They will be reviewed after five years (in 2000) and will normally last no more than 10 years. The exemption lists are also part of the GATS agreement.

The framework: GATS articles
Basic principles:

• All services are covered
• Most favoured nation treatment in areas where commitments made
• Transparency in regulations
• Regulations have to be objective and reasonable
• Internal payments: normally unrestricted
• Individual countries commitments: negotiated and bound
• Progressive liberalization: through further negotiation

 
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