[International Relations] World Trade Organisation

There were 8 rounds of negotiations between participating countries between 1947 and last year of GATT(1995). The first 6 rounds were related to curtailing tariff rates and 7th round included non tariff obstacles. 8th round in 1994 also known as Uruguay Round included a number of new subjects for consideration which also became most controversial.  WTO was culmination of Urugway round. WTO was constituted on Jan 1, 1995.

GATT was signed in 1947 by 23 countries in Geneva in wake of reducing international trade due to tariff restriction imposed by various countries during great depression of 1930s. Following were main objects of GATT

  • To provide equal opportunities to all countries in international market for trading purpose without any favor
  • To increase the effective demand for real income growth and goods
  • To minimize tariffs and other restrictions on trade for ensuring mutual benefits and to eliminate favours from international trade.
  • To provide amicable solutions to international trade related disputes by giving advices to member countries
  • To ensure better living standard in the world as a whole.

GATT also contained MFN(Most favored Nation) clause that is any concession given to any nation was automatically given to all the member countries.

Urugway round was started in 1986 and a detailed document known as Dunkel Proposal, was prepared after extensive discussion on various matters related to trade, which culminated into Final act in 1993. India signed this proposal on 1994.

GATT had only dealt with international trade in goods whereas, WTO also deals with trade in services, free foreign investment regimes in different countries, adoption of IPR, quota free trading in textiles and also free trading in agriculture. WTO is watchdog of International trade. WTO has provisions for anti-dumping duty and also prevention of non tariff barriers.


The highest decision making body of WTO is ” the trade policy review committee” consisting of trade ministers of member countries. This committee meets once in 2 years to address various problems/items related to implementation of agenda of WTO. So far 8 ministrial conferences have been held at Singapore(1996), Seattle(1999), Doha(2001), Cancun(2003), Hongkong(2005) and Geneva(1998,2008, 2011).


WTO has so far conducted following agreements:

  • Extension of GATT that is reduction of cusom duty on industrial goods to make world free trade zone. Under this agreement, peak rate of custom duty is reduced in phased manner to boost trade volume among member countries. The basic objective of this agreement is to reduce custom duty at 0%.
  • Abolishment of multifibre agreement(MFA) – MFA was imposed by developed countries in 1974 under which they fixed quota of textile, fabrics, garments to import from developing countries. The purpose was to protect their textile industries gainst comptition from cheap textitles coming from developing countries. WTO decided to dismantle MFA by end of 2004 and to create a quota free world trade in textile and as a result it was dismantled on 31st Dec, 2004. China was late entrant in WTO so quota for China was abolished in 2008.
  • TRIPS
  • General agreement on trade in services(GATS)
  • AOA- Agreement on Agriculture
  • TRIMS – Trade related Investment measures
  • NAMA- Non agricultural market access.

TRIPS

This agreement pertains to trade related Intellectual Property Rights like trademark, industrial design, copyright, patents etc.  India was having process patent regime since 1972 under Indian Patent Act 1970, whereby Indian drug companies could manufacture a patented drug by adopting different process thereby violating the product patent and not giving royalty to product patent holder and it was known as ‘patent piracy’ by developed countries. Process patenting came to an end after 3rd amendment of Indian Patent Act, 1970 in 2005 and product patenting was adopted to comply with TRIPS agreement of WTO. Introduction of product patenting implies that thereafter the tenure of patented drug shall be 20 years over which the patent holder will enjoy royalty as against common fear that drug prices could escalate after product patent. What has actually happened is that barring few drugs, there has not been any escalation in prices because 95% of drugs are off-patent and many of them are rotated through WTO beside product patenting of drugs does not apply to existing drugs. There are three important regulatory provisions embedded in Indian Patent Act within WTO
  1. Drug Price Control Order: Indian Government can invoke an order if it finds that a patented drug is too high priced and unaffordable by the masses.
  2. Provision for compulsory Licensing: It empowers government to provide license to any firm to manufacture a patented drug if the patented drug is sold in India at very high price
  3. Provision for Parallel Import: Cheap substitute of high price patented drug can be imported for masses.
Indian Government also enjoys right to cancel the license of a patentee in the event of requisite conditions of a patented act not being fulfilled. Introduction of drug patenting is expected to do away with spurious drugs in India.

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