Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance International and Trade - II - Question Paper

9. What is a WTO trade round? elaborate the advantages and disadvantages of negotiations through trade round?

(7 marks) < ans >

The WTO is a place where member governments go, and try to sort out the trade issues they face with every other. There are a number of ways of looking at the WTO. It’s an organization for liberalizing trade. It’s a forum for governments to negotiate trade agreements. It’s a place for them to settle trade disputes. It operates a system of trade rules. Above all it is stated to be a negotiating forum for all the issues faced by the nation regarding trade barriers and so. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations. These documents give the legal ground-rules for international commerce. They are essentially contracts, binding governments to keep their trade policies within agreed limits. The WTO began life on one January 1995, but its trading system is half a century older. Since 1948, the General Agreement on Tariffs and Trade (GATT) had given the rules for the system. Then comes the free trade gradually through negotiation. In this case opening markets can be beneficial, but it also requires adjustment. The WTO agreements allow countries to introduce modifications gradually, through “progressive liberalization”. The functions of WTO could be generalized, as its overriding objective is to help trade flow smoothly, freely, fairly and predictably. It does this by: Administering trade agreements, Acting as a forum for trade negotiations, Settling trade disputes, Reviewing national trade policies, Assisting developing countries in trade policy problems through tech. assistance and training programmes and Cooperating with other international organizations.

The organization covers different trading mechanism for all the nations based on different factors. This are stated to be trade without discrimination. If we keep close look to the principles under the WTO agreements, countries cannot normally discriminate ranging from their trading partners. Grant someone a special favour (such as a lower customs duty rate for 1 of their products) and you have to do the identical for all other WTO members. This principle is known as Most-Favoured-Nation (MFN) treatment. MFN is also a priority in the General Agreement on Trade in Services (GATS) (Article 2) and the Agreement on Trade- Related Aspects of Intellectual Property Rights (TRIPS) (Article 4), although in every agreement the principle is handled slightly differently. This are stated to be MFN treating other people equally. Imported and locally produced goods should be treated equally — at lowest after the foreign goods have entered the market. The identical should apply to foreign and domestic services, and to foreign and local trademarks, copyrights and patents. This are stated to be national treatment threatening foreigners and locals equally. National treatment only applies once a product; service or item of intellectual property has entered the market. With other principles it relates with predictability through binding and transparency, promoting fair competition, Encouraging development and economic reform On all of this, the WTO and its members are still going through a learning process. The current Doha Development Agenda includes developing countries’ concerns about the difficulties they face in implementing the Uruguay Round agreements.

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