[Economy] WTO: Bali Summit, Trade Facilitation Agreement (TFA), De-minimus level, 10% Subsidy Limit, Why Modi Opposed?

WTO organization chart

[Economy] WTO: Bali Summit, Trade Facilitation Agreement (TFA), De-minimus level, 10% Subsidy Limit, Why Modi Opposed?

  1. Prologue
  2. WTO: Structure and functions
  3. Tariff and Non-Tariff Barriers to Trade
  4. WTO agreements
  5. Agreement on Agriculture (AoA)
    1. Green. Blue and Amber subsidies
    2. Amber box: De Minimus limits
  6. What is Bali summit and Peace clause?
  7. What is Trade Facilitation Agreement?
  8. Why Modi opposed Trade Facilitation Agreement

Prologue

Consider this a “Fork” of the Economic Survey chapter 9 on Agriculture and food production.

WTO: Structure and functions

Q. Write a note on origin, structure and functions of WTO? 200 words
1944: Bretton Woods summit leads to birth of three institutions

Institution KEY IDEA
World bank Cheap loans for development projects in third world
IMF Balance of payment and Exchange rates
GATT
  • To reduce barriers to international trade.
  • Bretton Woods wanted to setup an international trade organization (ITO) but USA did not ratify.
  • Thus, GATT was born as a stopgap arrangement.
  • General Agreement on Tariffs and Trade.
  • GATT’s Uruguay round of talks => Marrakesh Treaty’94=> World trade organization (WTO) born in 1995, India founding member.

WTO organization chart

WTO structure
MinisterialConference
  • Supreme Decision Making body
  • 160 members, Latest member Yemen (Capital: Sanaa)
  • Meets once every two years,
  • deliberates on trade agreements
  • Appoints Director general
GeneralCouncil
  • day to day Decision Making body
  • Meets regularly at Geneva.
  • implements decision of ministerial conferences
  • Has Representative from each member state.

has two bodies, with separate chairmen

  1. Dispute settlement body
  2. Trade policy review body
  • Below general council, there are Committees on individual agreements and annexes- Anti dumping, Subsidies & countervailing measures (SCM) etc.
DirectorGeneral
  • Roberto Azevêdo
  • Appointed by ministerial conference
  • Has four years term.
  • heads the Secretariat at Geneva

WTO Functions

  1. Ensure the developing countries benefit from world trade, especially the least Developed countries.
  2. Reduce barriers to international trade – both tariff barriers and non-tariff barriers.
  3. Get the members Enter into multilateral trade agreements to achieve above objectives.
  4. Provide forum for negotiation and dispute settlement for the members, if the agreements are violated.
  5. Cooperate with UN, World and IMF for a global economic policy that improves livelihood, protects environment and promotes sustainable Development.

Tariff and Non-Tariff Barriers to Trade

All countries want to protect domestic industries and prevent entry of foreign players.  So, they create two types of barriers to International trade:

Tariff Barrier If US President Obama imposes 56% custom duty on Indian Cars.
Non-Tariff Barrier If Obama tries to restrict entry of Indian cars without imposing heavy taxes on Indian cars, for example

  1. Subsidies: Giving free electricity to Detroit car manufacturers. OR If American residents buy American made cars, Obama administration will pay 50% of your vehicle insurance premium, and so on.
  2. Public Procurement: Making rule that only American companies can fillup tender for new sarkaari cars.
  3. Other obstacles like not giving custom clearance quickly. Putting “quota” on each exporter country and so on.
  • World Trade organization (WTO) aims to reduce such tariff and non-tariff barriers to international trade.
  • But what if China starts manufacturing cheap cars with poor breaks, bad steering and carcinogenic paint. Can Obama ban such dangerous foreign products? Does WTO permit that?
  • Yes, WTO made two special agreements for “safety”:
Non-food products Technical Barriers to Trade Agreement (TBT)
Food Products
  • Sanitary and Phytosanitary Measures Agreement (SPS)
  • EU had banned Indian Alphonso under this provision.

WTO agreements

Gist of the WTO bali summit article

Gist of the whole controversy surrounding India, WTO and TFA

Q. Write a note on WTO agreements 200 words

Five categories of agreements (or 6, depending on which book you refer!)

T1: Goods

  1. General Agreement on Tariffs and Trade (GATT)
  2. Agreements on
    1. Agriculture
    2. Textile
    3. Antidumping
  3. Safety / quality checks related
    1. Sanitary and phytosanitary agreement  (SPS)
    2. Technical barriers to trade (TBT)
  4. Trade related investment measures (TRIMS)
  5. Subsidies and countervailing measures (SCM)

T2: Services

  • General Agreement on Trade in Services (GATS)
  • To ensure that services’ import/export enjoys the same principles of free and fair trade, just like the trade in goods.

T3: IPR

  • Trade related intellectual property rights (TRIPS)
  • Protects seven categories of IPR viz.
  1. copyrights
  2. patents
  3. trademarks
  4. Geographical indicators
  1. industrial designs
  2. integrated circuit layout-designs
  3. Trade secrets

T4: Dispute settlement

  • to enforce the trade agreements and commitments made by individual member country
  • once a complaint is filed,  first, the parties are allowed to sort the issue through mutual consultation
  • If that fails, formal adjudication by an expert panel.
T5: Policy review T6: plurilateral agreements
Periodically, WTO carries out audit/inspection/review of the trade policy of member states and gives them constructive feedback. Not signed by all countries:

  1. Civil aircrafts
  2. government procurement
  3. Dairy Products
  4. Bovine meat

~204 words

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