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3-World Trade Organization(WTO)
WTO was officially created in 1995.In reality, this organization was a substitution for GATT, General Agreement on Tariffs and Trade, and was to continue the 50-year duties of GATT.
The basic purpose of GATT and WTO, was development and improvement of international economic co-operations, reinforcement of global economics, creation of economic stability, development and growth by free and fair trade between countries.
3-1-Objectives of WTO
:In the preamble of WTO establishment agreement, the objectives of WTO have been stated as follows:
life improvement of people, complete employment guarantee, permanent increase of real income and helpful requests, growth of production and commodity and services trade.
also, the best use of the existing sources in the world as per the legal development purposes, protection and preserve of the environment and attempt to increase the developing countries’ share specially the least developed countries and understanding of the needs of the aforementioned countries to economic growth.
3-2-Principles Governing WTO
The WTO agreements are detailed and complicated and cover the subjects such as: commodity and services trade, agriculture, textiles, banking and communications, governmental purchases, international standards and intellectual property.
There are principles and fundamentals in different agreements of WTO as follows:
3-2-1- Guarantee of free trade between members
This principle provides that the global economics totally gains more profit from free trade than creation of trade restrictions.
Production increase, the best use of economic sources, utilization of economic potential possibilities of the states and the increase of job opportunities are some of the results of free trade and the possibility of free exchange of goods and services between countries.
3-2-2-Customs Tariff Reduction
Although in WTO, creation of trade restrictions have been forbidden, establishment of Customs Tariffs haven’t been barred.
Since the member states may –de facto- influence trade freedom by establishment of Customs Tariffs system, all states have agreed to reduce their Customs Tariffs considerably.
3-2-3-Abolition of all Trade Discriminations
Another basic principle of WTO is abolition of all trade discriminations.
The discriminative behavior towards similar imported goods from different countries referred to as the principle of most-favored-nation(MFN)has been stated in articles 1 of GATT(General Agreement on Tariffs and Trade) 1994, and article 2 of GATS(General Agreement on Trade in Services) and article 4 0f TRIPS(Agreement on Trade Related Aspects of Intellectual Property Rights).
These articles in different words provide that the imported goods and services from the member states of WTO must be subject to the same and similar behavior and must not enjoy different advantages, exemptions or aids solely because the said goods or services have been imported from a certain country.
Furthermore, as per article 3 of GATT 1994, and article 17 of GATS, there must be the same behavior towards both imported goods and services and local produced ones.
3-2-4-Transparency of Trade Regulations
As per this principle, all member states must promulgate the related trade regulations clearly and transparently.
As per article 10 of GATT 1994, all rules and regulations, judicial decisions and administrative directives established by each member state and effective in sale, distribution, transportation, insurance, storage of products and the like, must be promulgated.
3-2-5-Development and Economic Amendments
About three-fourth of WTO members are Developing Countries and Countries in Transition to Market Economics.
From the beginning, certain rules to assist the developing countries have been predicted in GATT and special advantages and commercial exemptions have been granted to them.
Developing Countries and Less Developed Countries have been given opportunities to adapt themselves to severe obligations of the organization(WTO) and can act towards their economic amendments through a transition period.
On the other hand, the developed countries were bound to open their markets to produced goods of the less developed countries and provide them with technical assistance.
3-3-Basic Agreements of WTO
One of the reasons of WTO establishment was to make its multilateral agreements uniform, the agreements binding just for those states to which they were joined. The most important and basic agreements of WTO are as follows:
3-3-1-The Agreement of Establishing WTO
This agreement containing 16 articles doesn’t include detailed and/or substantive regulations concerning the members’ obligations but provides the general construction and the principles governing the organization and is considered as the charter of WTO.
3-3-2-The General Agreement on Tariffs and Trade(GATT)
This agreement of 1994 provides the main principles on commodity trade and basically is the GATT agreement of 1947 annexed to WTO establishment agreement.
This agreement is very important and includes the most important member states’ obligations on commodity trade such as:
non-discrimination principle towards the other members, removing the non-tariff commercial obstacles, obligation to reduce the customs tariffs, establishment of fair trade and making the trade national rules transparent.
3-3-3-The General Agreement on Trade in Services(GATS)
This agreement is about trade in services. Up to 1995,GATT rules was only about the commodity trade but by ratification of this agreement (GATS) the trade in services is also under the control of WTO.
This agreement tries to use the GATT principles for trade in services and guarantee the free trade in this section too. GATS consists of 3 sections:
I-It provides the main text of obligations and principles governing the trade in services including, observance of MFN(most-favored nation) principle, or non-discrimination or transparency in rules and regulations.
II-The annexes concerning the laws and rules governing the special parts of services such as: movement of work force, providing financial services, communications services, air transport.
III-Stating the specific obligations of each country concerning the freedom of special services.
3-3-4-Understanding on Rules and Procedures governingthe settlement of disputes
One of the deficiencies of GATT (1947), lack of an organized method of legal and judicial dispute settlement. This deficiency was removed by ratification of the aforementioned understanding.
When a state adopts certain trade policies and measures, and another state considers them as breach of WTO obligations, a dispute arises.
The WTO member states have agreed in case of disagreement concerning policies, decisions or commercial activities of one state and/or if the states have no similar or the same interpretation regarding WTO agreements, the states must use the dispute settlement mechanism of WTO to settle the disputes and can’t use the other dispute settlement alternatives.
3-3-5-The Agreement of Trade Related Aspects of Intellectual Property (TRIPS)
This agreement includes subjects related to intellectual property,both copyright and industrial property, and unlike its title is not limited to those aspects of intellectual property directly related to trade.
Inclusion of this agreement in WTO was based on this viewpoint that most aspects of intellectual property will affect the fair trade process and non-observance of the intellectual property causes unfair competition.
TRIPS covers the following subjects:
Firstly, the members must not treat discriminatory behavior towards the intellectual property subject of member states’ imported products and there mustn’t be different treatment towards the imported products of different member states.
And also there mustn’t be any discrimination between local and foreign products.
Secondly, the intellectual property must be under the standard protections in all member states.
In this respect, the member states were bound to join Berne Convention for the protection of Literary and Artistic works and Paris Convention for the protection of Industrial property.
Thirdly, regulations regarding the recognition of intellectual property shall be enforced.
TRIPS states that the member states must provide sanctions and appropriate and enough punishments to prevent infringement of intellectual property.
3-3-6-Agreement on Trade Related Investment Measures(TRIMS)
TRIMS doesn’t intend to directly establish an applicable system for foreign investment and its protection. In reality, this agreement concerns with the trade impediments to which a foreign investor faced in the destination country.
There is a list of cases-annexed to this agreement-
referred to as discriminatory and forbidden behavior, as per this agreement, including, to make a foreign investor buy local products, to impose limitations on a foreign investor concerning the purchase of the imported goods, the requirement of using local goods in the produced goods, imposing limitation on the export of produced goods.
3-3-7-Anti-Dumping Agreement
The free trade principle provides the member states of WTO are not only bound to make suitable legal and economic frameworks to prove free trade between member states to be true, but avoid taking measures to falsify the aforementioned principle.
One of the unfair measures which hurts competition principle in international commercial relations is Dumping and granting subsidies by the states to protect export that can cause damages to the industries of the imported country.
When an exporter exports a product cheaper than its cost price to another country, Dumping occurs. Most countries consider this measure as An unfair competition that can cause damages to their local industries, therefore it must be forbidden.
Anti-Dumping code was passed in Kennedy Round negotiations and in Uruguay Round negotiations, Anti-Dumping agreement was passed as a binding document of WTO.
3-3-8-Agreement on Subsidies and Countervailing Measures(SCM)
Granting export subsidies causes price reduction of a state’s export goods in the other states and this price reduction makes the local productions of the imported country not compete with the imported products and incur losses.
Because of the importance of subsidies and their negative roles in free and fair trade, at first the payment of subsidies was predicted in article 16 of GATT.
Subsidy means governmental financial protections from which its receiver makes a profit.
In this respect, export subsidy includes aids, rewards and advantages paid to the exporters of certain products by the government or its affiliated institutions to promote export and/or keeping and development of export markets.
The (SCM agreement)includes 3 groups of export subsidies :I-prohibited subsidies, II-actionable subsidies, III- non-actionable subsidies.
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