World Trade Agreement

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World Trade Agreement (WTA) came into existence as a result of an attempt to materialise the free trade concept, by removing barriers of trade to make it free and fair. The post world war depression caused many countries to think of better international trade concepts to resolve the economic crisis. The meeting of nations at Bretton Woods, New Hampshire in the year 1944, paved way for the establishment of a new regime wich would ensure free and fair trade. The objective was to stimulate economic recovery through trade promotion, by encouraging tariffs reduction and eliminating international trade barriers.

After three years of negotiation the General Agreement on Tariff and Trade (GATT) came into existence in the year 1947. Seven rounds of GATT were completed till 1985 and the 8th round commonly known as “Uruguay round” of negotiations commenced in the year 1986. The scope of GATT was further widened in this round of negotiations by including new areas such as agriculture, textiles, intellectual property rights, investment measures, sanitary and phytosanitary standards and services. This round of negotiations concluded in the year 1994 and GATT was replaced by WTA. An International body for coordination and implimentation of WTA commitments was esatablished under the name World Trade Organisation (WTO).

The WTO is the first global organisation dealing with trade rules and trade disciplines with the objective of liberalising trade in order to make it free and fair. It acts as a forum for governments to negotiate trade agreements and to settle trade disputes with well-defined rules and regulations. At the time of conclusion of Hong Kong Ministerial Conference, WTO had 149 members and there are 30 more countries seeking access to WTO

Principles of WTO

•  Most Favoured Nation (MFN): One of the main objectives of WTO is to eliminate the trade discrimination between the trading partners. It should give "most favoured nation (MFN)" status to all trading partners.

•  National Treatment: A country should not discriminate between its own products and services with those of other nations, and should treat them on equal footing. A member country should allow the foreign product in their domestic market giving equal opportunity for ensuring free and fair trade.

•  Reciprocity: This is another principle of WTO, which enables bilateral agreements under multi-lateral trade negotiations.

Advantages

•  Predictability: When countries make agreements to open their markets for goods or services to other nations, they are making a commitment in respect of ceilings on customs tariff bound rates for the import products. This commitment enables predictability in future tariff rates which would facilitate growth in trade.

•  Promoting Fair Competition: WTA agreements aim to support fair competition in trade in goods and services etc.

•  Encouraging Development and Eeconomic Reform: Over 60 countries implemented trade liberalization programmes autonomously. WTA recognises the promotional role of trade in development.

Last updated on: 19-12-2007