CHAPTER 1

INTRODUCTION

What is World Trade Organization (WTO) :The World Trade Organization (WTO) is an organization that intends to supervise
and liberalize international trade. The organization officially commenced on 1
January 1995 under the Marrakech Agreement, replacing the General Agreement on
Tariffs and Trade (GATT), which commenced in 1948. The organization deals with
regulation of trade between participating countries; it provides a framework for
negotiating and formalizing trade agreements, and a dispute resolution process aimed
at enforcing participants' adherence to WTO agreements, which are signed by
representatives of member governments and ratified by their parliaments. Most of the
issues that the WTO focuses on derive from previous trade negotiations, especially
from the Uruguay Round (19861994).
The organization is attempting to complete negotiations on the Doha Development
Round, which was launched in 2001 with an explicit focus on addressing the needs of
developing countries. As of June 2012, the future of the Doha Round remains
uncertain: the work programme lists 21 subjects in which the original deadline of 1
January 2005 was missed, and the round is still incomplete. The conflict between free
trade on industrial goods and services but retention of protectionism on farm
subsidies to domestic agricultural sector (requested by developed countries) and
the substantiation of the international liberalization of fair trade on agricultural
products (requested by developing countries) remain the major obstacles. These
points of contention have hindered any progress to launch new WTO negotiations
beyond the Doha Development Round. As a result of this impasse, there has been an
increasing number of bilateralfree trade agreements signed. As of July 2012, there are
various negotiation groups in the WTO system for the current agricultural trade
negotiation which is in the condition of stalemate.

History :The WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), was
established after World War II in the wake of other new multilateral institutions
dedicated to international economic cooperation notably the Bretton Woods
institutions known as the World Bank and the International Monetary Fund. A
comparable international institution for trade, named the International Trade
Organization was successfully negotiated. The ITO was to be a United Nations
specialized agency and would address not only trade barriers but other issues
indirectly related to trade, including employment, investment, restrictive business
practices, and commodity agreements. But the ITO treaty was not approved by the
U.S. and a few other signatories and never went into effect.
In the absence of an international organization for trade, the GATT would over the
years "transform itself" into a de facto international organization

GATT rounds of negotiations :The GATT was the only multilateral instrument governing international trade from
1946 until the WTO was established on 1 January 1995. Despite attempts in the mid1950s and 1960s to create some form of institutional mechanism for international
trade, the GATT continued to operate for almost half a century as a semiinstitutionalized multilateral treaty regime on a provisional basis.

From Geneva to Tokyo :Seven rounds of negotiations occurred under GATT. The first real GATT trade
rounds concentrated on further reducing tariffs. Then, the Kennedy Roundin the midsixties brought about a GATT anti-dumping Agreement and a section on
development. The Tokyo Round during the seventies was the first major attempt to
tackle trade barriers that do not take the form of tariffs, and to improve the system,
adopting a series of agreements on non-tariff barriers, which in some cases interpreted
existing GATT rules, and in others broke entirely new ground. Because
these plurilateral agreements were not accepted by the full GATT membership, they
were often informally called "codes". Several of these codes were amended in the
Uruguay Round, and turned into multilateral commitments accepted by all WTO
3

members. Only four remained plurilateral (those on government procurement, bovine

meat, civil aircraft and dairy products), but in 1997 WTO members agreed to
terminate the bovine meat and dairy agreements, leaving only two.

Uruguay Round :Main article: Uruguay Round

Well before GATT's 40th anniversary, its members concluded that the GATT system
was straining to adapt to a new globalizing world economy. In response to the
problems identified in the 1982 Ministerial Declaration (structural deficiencies, spillover impacts of certain countries' policies on world trade GATT could not manage
etc.), the eighth GATT round known as the Uruguay Round was launched in
September 1986, in Punta del Este, Uruguay.
It was the biggest negotiating mandate on trade ever agreed: the talks were going to
extend the trading system into several new areas, notably trade in services and
intellectual property, and to reform trade in the sensitive sectors of agriculture and
textiles; all the original GATT articles were up for review. The Final Act concluding
the Uruguay Round and officially establishing the WTO regime was signed 15 April
1994, during the ministerial meeting at Marrakesh, Morocco, and hence is known as
the Marrakesh Agreement.
The GATT still exists as the WTO's umbrella treaty for trade in goods, updated as a
result of the Uruguay Round negotiations (a distinction is made between GATT 1994,
the updated parts of GATT, and GATT 1947, the original agreement which is still the
heart of GATT 1994). GATT 1994 is not however the only legally binding agreement
included via the Final Act at Marrakesh; a long list of about 60 agreements, annexes,
decisions and understandings was adopted. The agreements fall into a structure with
six main parts:

The Agreement Establishing the WTO

Goods and investment the Multilateral Agreements on Trade in Goods including

the GATT 1994 and the Trade Related Investment Measures(TRIMS)

Services the General Agreement on Trade in Services

Intellectual property the Agreement on Trade-Related Aspects of Intellectual

Property Rights (TRIPS)

Dispute settlement (DSU)

Reviews of governments' trade policies (TPRM)

In terms of the WTO's principle relating to tariff "ceiling-binding" (No. 3), the
Uruguay Round has been successful in increasing binding commitments by both
developed and developing countries, as may be seen in the percentages of tariffs
bound before and after the 19861994 talks.

Ministerial conferences :The highest decision-making body of the WTO is the Ministerial Conference, which
usually meets every two years. It brings together all members of the WTO, all of
which are countries or customs unions. The Ministerial Conference can take decisions
on all matters under any of the multilateral trade agreements. The inaugural
ministerial conference was held in Singapore in 1996. Disagreements between largely
developed and developing economies emerged during this conference over four issues
initiated by this conference, which led to them being collectively referred to as the
"Singapore issues". The second ministerial conference was held in Geneva in
Switzerland. The third conference in Seattle, Washington ended in failure, with
massive demonstrations and police and National Guard crowd-control efforts drawing
worldwide attention. The fourth ministerial conference was held

in Doha in

the Persian Gulf nation of Qatar. The Doha Development Roundwas launched at the
conference. The conference also approved the joining of China, which became the
143rd member to join. The fifth ministerial conference was held in Cancn, Mexico,
aiming at forging agreement on the Doha round. An alliance of 22 southern states,
the G20

developing

nations (led

by

India,

China Brazil, ASEAN led

by

the Philippines), resisted demands from the North for agreements on the so-called
"Singapore issues" and called for an end to agricultural subsidies within the EU and
the US. The talks broke down without progress.
The sixth WTO ministerial conference was held in Hong Kong from 1318 December
2005. It was considered vital if the four-year-old Doha Development Round
negotiations were to move forward sufficiently to conclude the round in 2006. In this
5

meeting, countries agreed to phase out all their agricultural export subsidies by the
end of 2013, and terminate any cotton export subsidies by the end of 2006. Further
concessions to developing countries included an agreement to introduce duty free,
tariff free access for goods from the Least Developed Countries, following
theEverything but Arms initiative of the European Union but with up to 3% of
tariff lines exempted. Other major issues were left for further negotiation to be
completed by the end of 2010. The WTO General Council, on 26 May 2009, agreed to
hold a seventh WTO ministerial conference session in Geneva from 30 November-3
December 2009. A statement by chairman Amb. Mario Matus acknowledged that the
prime purpose was to remedy a breach of protocol requiring two-yearly "regular"
meetings, which had lapsed with the Doha Round failure in 2005, and that the
"scaled-down" meeting would not be a negotiating session, but "emphasis will be on
transparency and open discussion rather than on small group processes and informal
negotiating structures". The general theme for discussion was "The WTO, the
Multilateral Trading System and the Current Global Economic Environment"

Doha Round (Doha Agenda) :The WTO launched the current round of negotiations, the Doha Development Round,
at the fourth ministerial conference in Doha, Qatar in November 2001. This was to be
an ambitious effort to make globalization more inclusive and help the world's poor,
particularly by slashing barriers and subsidies in farming. The initial agenda
comprised both further trade liberalization and new rule-making, underpinned by
commitments to strengthen substantial assistance to developing countries.
The negotiations have been highly contentious. Disagreements still continue over
several key areas including agriculture subsidies, which emerged as critical in July
2006.] According to a European Union statement, "The 2008 Ministerial meeting
broke down over a disagreement between exporters of agricultural bulk commodities
and countries with large numbers of subsistence farmers on the precise terms of a
'special safeguard measure' to protect farmers from surges in imports." The position of
theEuropean Commission is that "The successful conclusion of the Doha negotiations
would confirm the central role of multilateral liberalisation and rule-making. It would
confirm the WTO as a powerful shield against protectionist backsliding." An impasse
remains and, as of August 2013, agreement has not been reached, despite intense
6

negotiations at several ministerial conferences and at other sessions. On 27 March

2013, the chairman of agriculture talks announced "a proposal to loosen price support
disciplines for developing countries public stocks and domestic food aid." He added:
...we are not yet close to agreementin fact, the substantive discussion of the
proposal is only beginning.
Objective :

To create a knowledge base on various matter concerning various National

and International Trade Laws and Protocols, and their National and
International implications and ramifications.

Carry out research and development and the building up of a clearing-house of

cases on all matters of WTO agreements which are of national concern
including safeguards and redressal mechanisms and suggesting alternative
formulation in national interest which could form subject matters of future
consultation or pre negotiations of WTO agreement.

Increasing awareness amongst Domestic Industry, business, agriculture,

service and other sectors on the impacts of trade laws arising out of WTO
agreement and other treaties as member of WTO.

Cooperating with industry associates, bodies set up by Govt. of India and

Export Promotion Council on various issues related to tariff, non tariff and
tactical barriers and undertake drive for awareness campaign by jointly or
severally holding conferences, seminars, group discussions and other mode of
awareness and campaign as also to develop linkages with overseas
organizations in order to create a common perception and approach to the
resolution of multilateral trade issues.

Exploit all potential provisions of WTO agreement available to the developing

nations and advising and counseling the Government of India on all such
issues of national importance.

To assist the Government in negotiating with the International Community in

the perspective of the WTO regime and to help strengthen the Indian position
in these regards in all possible ways.
7

To develop a base of expertise amongst the members of the Institute on

Intellectual Property Rights, TRIPS, Anti-dumping laws, EXIM Policy matters
etc., through Seminars, training programs and such other methods as may be
considered effective.

To co-ordinate efforts with the Government in creating a level playing field

particularly for the accounting professionals in India specially in view of the
implementation of the WTO regime on GATS through the most effective
means possible including the organization of seminars, publication of articles
and monographs, and presentation before the Government.

Identify areas of non-fulfillment of the WTO agreement which concern Indian

interest and suggest line of action and remedies open for fulfillment of these
obligations.

Initiate discussions on making the domestic trade and export and import
policies more WTO compatible and suggest initiatives to be taken in this
respect at various levels to ensure high growth in export and economy
including the development of various modes of synergy and effective
regulation of trade laws which are functionally divided between Commerce,
Finance, Foreign and Product related Ministries.

To study the impact and threat perception of WTO agreement on the growing
service sector industries including all those covered under 'business services'
of GATS agreement in general and knowledge, accountancy and consulting
services, transport, communication, medical, education, insurance, banking in
particular and suggest policy issues, develop research and education programs
aimed at educating members of ICAI.

Significance :The best international agreement is not worth very much if its obligations cannot be
enforced when one of the signatories fails to comply with such obligations. An
effective mechanism to settle disputes thus increases the practical value of the
commitments the signatories undertake in an international agreement. The fact that
the Members of the (WTO)established the current dispute settlement system during
the Uruguay Roundof Multilateral Trade Negotiations underscores the high
importance they attach to compliance by all Members with their obligations under
the WTO Agreement.
Settling disputes in a timely and structured manner is important. It helps to prevent
the detrimental effects of unresolved international trade conflicts and to mitigate the
imbalances between stronger and weaker players by having their disputes settled on
the basis of rules rather than having power determine the outcome. Most people
consider the WTO dispute settlement system to be one of the major results of the
Uruguay Round. After the entry into force of the WTO Agreement in 1995, the
dispute settlement system soon gained practical importance as Members frequently
resorted to using this system.

Principal of trading system :The WTO establishes a framework for trade policies; it does not define or specify
outcomes. That is, it is concerned with setting the rules of the trade policy
games. Five principles are of particular importance in understanding both the pre1994 GATT and the WTO:
1. Non-discrimination. It has two major components: the most favoured
nation (MFN) rule, and the national treatment policy. Both are embedded in
the main WTO rules on goods, services, and intellectual property, but their
precise scope and nature differ across these areas. The MFN rule requires that
a WTO member must apply the same conditions on all trade with other WTO
9

members, i.e. a WTO member has to grant the most favorable conditions
under which it allows trade in a certain product type to all other WTO
members."Grant someone a special favour and you have to do the same for all
other WTO members."National treatment means that imported goods should
be treated no less favorably than domestically produced goods (at least after
the foreign goods have entered the market) and was introduced to tackle nontariff barriers to trade (e.g. technical standards, security standards et al.
discriminating against imported goods).
2. Reciprocity. It reflects both a desire to limit the scope of free-riding that may
arise because of the MFN rule, and a desire to obtain better access to foreign
markets. A related point is that for a nation to negotiate, it is necessary that
the

gain

from

doing

so

be

greater

than

the

gain

available

from unilateral liberalization; reciprocal concessions intend to ensure that

such gains will materialise.
3. Binding and enforceable commitments. The tariff commitments made by
WTO members in a multilateral trade negotiation and on accession are
enumerated in a schedule (list) of concessions. These schedules establish
"ceiling bindings": a country can change its bindings, but only after
negotiating with its trading partners, which could mean compensating them
for loss of trade. If satisfaction is not obtained, the complaining country may
invoke the WTO dispute settlement procedures.
4. Transparency. The WTO members are required to publish their trade
regulations, to maintain institutions allowing for the review of administrative
decisions affecting trade, to respond to requests for information by other
members, and to notify changes in trade policies to the WTO. These internal
transparency requirements are supplemented and facilitated by periodic
country-specific reports (trade policy reviews) through the Trade Policy
Review Mechanism (TPRM).] The WTO system tries also to improve
predictability and stability, discouraging the use of quotas and other measures
used to set limits on quantities of imports
5. Safety valves. In specific circumstances, governments are able to restrict
trade. The WTO's agreements permit members to take measures to protect not
only the environment but also public health, animal health and plant health.
10

There are three types of provision in this direction:

Articles allowing for the use of trade measures to attain non-economic

objectives;

Articles aimed at ensuring "fair competition"; members must not use

environmental protection measures as a means of disguising protectionist
policies.

Provisions permitting intervention in trade for economic reasons.

Exceptions to the MFN principle also allow for preferential treatment

of developing countries, regional free trade areas and customs unions.

Function :Among the various functions of the WTO, these are regarded by analysts as the most
important:

It oversees the implementation, administration and operation of the covered

agreements.

It provides a forum for negotiations and for settling disputes.

Additionally, it is the WTO's duty to review and propagate the national trade policies,
and to ensure the coherence and transparency of trade policies through surveillance in
global economic policy-making.Another priority of the WTO is the assistance
of developing, least-developed and low-income countries in transition to adjust to
WTO rules and disciplines through technical cooperation and training.[40]
The WTO is also a center of economic research and analysis: regular assessments of
the global trade picture in its annual publications and research reports on specific
topics are produced by the organization. Finally, the WTO cooperates closely with the
two other components of the Bretton Woods system, the IMF and the World Bank.

11

CHAPTER 2

12

REVIEW OF LITERATURE
The General Agreement on Tariffs and Trade :The Governments of the Commonwealth of Australia, the Kingdom of Belgium, the
United States of Brazil, Burma, Canada, Ceylon, the Republic of Chile, the Republic
of China, the Republic of Cuba, the Czechoslovak Republic, the French Republic,
India, Lebanon, the Grand-Duchy of Luxemburg, the Kingdom of the Netherlands,
New Zealand, the Kingdom of Norway, Pakistan, Southern Rhodesia, Syria, the
Union of South Africa, the United Kingdom of Great Britain and Northern Ireland,and
the United States of America:

Recognizing that their relations in the field of trade and economic Endeavour should
be conducted with a view to raising standards of living, ensuring full employment and
a large and steadily growing volume of real income and effective demand, developing
the full use of the resources of the world and expanding the production and exchange
of goods,

Being desirous of contributing to these objectives by entering into reciprocal and

mutually advantageous arrangements directed to the substantial reduction of tariffs
and other barriers to trade and to the elimination of discriminatory treatment in
international commerce,

Have through their Representatives agreed as follows:

Article :General Most-Favoured-Nation Treatment :-

1. With respect to customs duties and charges of any kind imposed on or in

connection with importation or exportation or imposed on the international transfer of
payments for imports or exports, and with respect to the method of levying such
duties and charges, and with respect to all rules and formalities in connection with
importation and exportation, and with respect to all matters referred to

13

2. The provisions of paragraph 1 of this Article shall not require the elimination of
any preferences in respect of import duties or charges which do not exceed the levels
provided for in paragraph 4 of this Article and which fall within the following
descriptions:

(a) Preferences in force exclusively between two or more of the

territories listed in Annex A, subject to the conditions set forth therein;

(b) Preferences in force exclusively between two or more territories

which on July 1, 1939, were connected by common sovereignty or
relations of protection or suzerainty and which are listed in Annexes B,
C and D, subject to the conditions set forth therein;

(c) Preferences in force exclusively between the United States of

America and the Republic of Cuba;

(d) Preferences in force exclusively between neighbouring countries

listed in Annexes E and F.

Schedules of Concessions :-

1. (a) Each contracting party shall accord to the commerce of the other contracting
parties treatment no less favourable than that provided for in the appropriate Part of
the appropriate Schedule annexed to this Agreement.

(b) The products described in Part I of the Schedule relating to any contracting
party, which are the products of territories of other contracting parties, shall, on their
importation into the territory to which the Schedule relates, and subject to the terms,
conditions or qualifications set forth in that Schedule, be exempt from ordinary
customs duties in excess of those set forth and provided therein. Such products shall
also be exempt from all other duties or charges of any kind imposed on or in
connection with the importation in excess of those imposed on the date of this

14

Agreement or those directly and mandatorily required to be imposed thereafter by

legislation in force in the importing territory on that date.

2. Nothing in this Article shall prevent any contracting party from imposing at any
time on the importation of any product:

(a) A charge equivalent to an internal tax imposed consistently with

the provisions of paragraph 2 of Article III in respect of the like
domestic product or in respect of an article from which the imported
product has been manufactured or produced in whole or in part;

(b) Any anti-dumping or countervailing duty applied consistently with

the provisions of Article VI

(c) Fees or other charges commensurate with the cost of services

rendered.

3. No contracting party shall alter its method of determining dutiable value or of

converting currencies so as to impair the value of any of the concessions provided for
in the appropriate Schedule annexed to this Agreement.

4. If any contracting party establishes, maintains or authorizes, formally or in effect, a

monopoly of the importation of any product described in the appropriate Schedule
annexed to this Agreement, such monopoly shall not, except as provided for in that
Schedule or as otherwise agreed between the parties which initially negotiated the
concession, operate so as to afford protection on the average in excess of the amount
of protection provided for in that Schedule. The provisions of this paragraph shall not
limit the use by contracting parties of any form of assistance to domestic producers
permitted by other provisions of this Agreement.

The Schedules annexed to this Agreement are hereby made an integral part of

Part I of this Agreement.

15

National Treatment on Internal Taxation and Regulation :-

1. The contracting parties recognize that internal taxes and other internal charges, and
laws, regulations and requirements affecting the internal sale, offering for sale,
purchase, transportation, distribution or use of products, and internal quantitative
regulations requiring the mixture, processing or use of products in specified amounts
or proportions, should not be applied to imported or domestic products so as to afford
protection to domestic production.

2. The products of the territory of any contracting party imported into the territory of
any other contracting party shall not be subject, directly or indirectly, to internal taxes
or other internal charges of any kind in excess of those applied, directly or indirectly,
to like domestic products. Moreover, no contracting party shall otherwise apply
internal taxes or other internal charges to imported or domestic products in a manner
contrary to the principles set forth in paragraph 1

3. With respect to any existing internal tax which is inconsistent with the provisions
of paragraph 2, but which is specifically authorized under a trade agreement, in force
on April 10, 1947, in which the import duty on the taxed product is bound against
increase, the contracting party imposing the tax shall be free to postpone the
application of the provisions of paragraph 2 to such tax until such time as it can obtain
release from the obligations of such trade agreement in order to permit the increase of
such duty to the extent necessary to compensate for the elimination of the protective
element of the tax.

4. The products of the territory of any contracting party imported into the territory of
any other contracting party shall be accorded treatment no less favourable than that
accorded to like products of national origin in respect of all laws, regulations and
requirements affecting their internal sale, offering for sale, purchase, transportation,
distribution or use. The provisions of this paragraph shall not prevent the application
of differential internal transportation charges which are based exclusively on the
economic operation of the means of transport and not on the nationality of the
product.
16

5. No contracting party shall establish or maintain any internal quantitative regulation

relating to the mixture, processing or use of products in specified amounts or
proportions which requires, directly or indirectly, that any specified amount or
proportion of any product which is the subject of the regulation must be supplied from
domestic sources. Moreover, no contracting party shall otherwise apply internal
quantitative regulations in a manner contrary to the principles set forth in paragraph 1

6. No internal quantitative regulation relating to the mixture, processing or use of

products in specified amounts or proportions shall be applied in such a manner as to
allocate any such amount or proportion among external sources of supply.

7. The provisions of this Article shall not prevent any contracting party from
establishing or maintaining internal quantitative regulations relating to exposed
cinematograph films and meeting the requirements of Article IV.

Special Provisions relating to Cinematograph Films :-

If any contracting party establishes or maintains internal quantitative regulations

relating to exposed cinematograph films, such regulations shall take the form of
screen quotas which shall conform to the following requirements:

(a) Screen quotas may require the exhibition of cinematograph films of

national origin during a specified minimum proportion of the total
screen time actually utilized, over a specified period of not less than
one year, in the commercial exhibition of all films of whatever origin,
and shall be computed on the basis of screen time per theatre per year
or the equivalent thereof;

(b) With the exception of screen time reserved for films of national
origin under a screen quota, screen time including that released by
administrative action from screen time reserved for films of national

17

origin, shall not be allocated formally or in effect among sources of

supply;
(c) Notwithstanding the provisions of subparagraph (b) of this Article,
any contracting party may maintain screen quotas conforming to the
requirements of subparagraph (a) of this Article which reserve a
minimum proportion of screen time for films of a specified origin other
than that of the contracting party imposing such screen quotas;
Provided that no such minimum proportion of screen time shall be
increased above the level in effect on April 10, 1947;

(d) Screen quotas shall be subject to negotiation for their limitation,

liberalization or elimination.

Freedom of Transit :-

1. Goods (including baggage), and also vessels and other means of transport, shall be
deemed to be in transit across the territory of a contracting party when the passage
across such territory, with or without trans-shipment, warehousing, breaking bulk, or
change in the mode of transport, is only a portion of a complete journey beginning
and terminating beyond the frontier of the contracting party across whose territory the
traffic passes. Traffic of this nature is termed in this article "traffic in transit".

2. There shall be freedom of transit through the territory of each contracting party, via
the routes most convenient for international transit, for traffic in transit to or from the
territory of other contracting parties. No distinction shall be made which is based on
the flag of vessels, the place of origin, departure, entry, exit or destination, or on any
circumstances relating to the ownership of goods, of vessels or of other means of
transport.

3. All charges and regulations imposed by contracting parties on traffic in transit to or

from the territories of other contracting parties shall be reasonable, having regard to
the conditions of the traffic.

18

4. With respect to all charges, regulations and formalities in connection with transit,
each contracting party shall accord to traffic in transit to or from the territory of any
other contracting party treatment no less favourable than the treatment accorded to
traffic in transit to or from any third country.

5. The provisions of this Article shall not apply to the operation of aircraft in transit,
but shall apply to air transit of goods (including baggage).

Anti-dumping and Countervailing Duties :-

1. The contracting parties recognize that dumping, by which products of one country
are introduced into the commerce of another country at less than the normal value of
the products, is to be condemned if it causes or threatens material injury to an
established industry in the territory of a contracting party or materially retards the
establishment of a domestic industry. For the purposes of this Article, a product is to
be considered as being introduced into the commerce of an importing country at less
than its normal value, if the price of the product exported from one country to another

(a) Is less than the comparable price, in the ordinary course of trade,
for the like product when destined for consumption in the exporting
country, or,

(b) In the absence of such domestic price, is less than either

(i) the highest comparable price for the like product for export to
any third country in the ordinary course of trade, or

(ii) the cost of production of the product in the country of origin

plus a reasonable addition for selling cost and profit.

Due allowance shall be made in each case for differences in conditions and terms of
sale, for differences in taxation, and for other differences affecting price
comparability.
19

2. In order to offset or prevent dumping, a contracting party may levy on any dumped
product an anti-dumping duty not greater in amount than the margin of dumping in
respect of such product. For the purposes of this Article, the margin of dumping is the
price difference determined in accordance with the provisions of paragraph 1

3. No countervailing duty shall be levied on any product of the territory of any

contracting party imported into the territory of another contracting party in excess of
an amount equal to the estimated bounty or subsidy determined to have been granted,
directly or indirectly, on the manufacture, production or export of such product in the
country of origin or exportation, including any special subsidy to the transportation of
a particular product. The term "countervailing duty" shall be understood to mean a
special duty levied for the purpose of offsetting any bounty or subsidy bestowed,
directly, or indirectly, upon the manufacture, production or export of any
merchandise.

4. No product of the territory of any contracting party imported into the territory of
any other contracting party shall be subject to anti-dumping or countervailing duty by
reason of the exemption of such product from duties or taxes borne by the like
product when destined for consumption in the country of origin or exportation, or by
reason of the refund of such duties or taxes.
5. No product of the territory of any contracting party imported into the territory of
any other contracting party shall be subject to both anti-dumping and countervailing
duties to compensate for the same situation of dumping or export subsidization. That
such action shall be reported immediately to the CONTRACTING PARTIES and that
the countervailing duty shall be withdrawn promptly if the CONTRACTING
PARTIES disapprove.

6. A system for the stabilization of the domestic price or of the return to domestic
producers of a primary commodity, independently of the movements of export prices,
which results at times in the sale of the commodity for export at a price lower than the
comparable price charged for the like commodity to buyers in the domestic market,
shall be presumed not to result in material injury within the meaning of paragraph 6 if

20

it is determined by consultation among the contracting parties substantially interested

in the commodity concerned that:

(a) the system has also resulted in the sale of the commodity for export
at a price higher than the comparable price charged for the like
commodity to buyers in the domestic market, and

(b) the system is so operated, either because of the effective regulation

of production, or otherwise, as not to stimulate exports unduly or
otherwise seriously prejudice the interests of other contracting parties.

Valuation for Customs Purposes :-

1. The contracting parties recognize the validity of the general principles of valuation
set forth in the following paragraphs of this Article, and they undertake to give effect
to such principles, in respect of all products subject to duties or other charges or
restrictions on importation and exportation based upon or regulated in any manner by
value. Moreover, they shall, upon a request by another contracting party review the
operation of any of their laws or regulations relating to value for customs purposes in
the light of these principles. The CONTRACTING PARTIES may request from
contracting parties reports on steps taken by them in pursuance of the provisions of
this Article.

2. (a) The value for customs purposes of imported merchandise should be based on
the actual value of the imported merchandise on which duty is assessed, or of like
merchandise, and should not be based on the value of merchandise of national origin
or on arbitrary or fictitious values.

(b) "Actual value" should be the price at which, at a time and place determined by
the legislation of the country of importation, such or like merchandise is sold or
offered for sale in the ordinary course of trade under fully competitive conditions. To
the extent to which the price of such or like merchandise is governed by the quantity

21

in a particular transaction, the price to be considered should uniformly be related to

either
(i) Comparable quantities, or
(ii) quantities not less favourable to importers than those in which the
greater volume of the merchandise is sold in the trade between the
countries of exportation and importation.

(c) When the actual value is not ascertainable in accordance with

subparagraph
(d) of this paragraph, the value for customs purposes should be based on the
nearest ascertainable equivalent of such value.

3. The value for customs purposes of any imported product should not include the
amount of any internal tax, applicable within the country of origin or export, from
which the imported product has been exempted or has been or will be relieved by
means of refund.

4. The bases and methods for determining the value of products subject to duties or
other charges or restrictions based upon or regulated in any manner by value should
be stable and should be given sufficient publicity to enable traders to estimate, with a
reasonable degree of certainty, the value for customs purposes.

Fees and Formalities connected with Importation and Exportation :-

1.

(a) All fees and charges of whatever character (other than import and export

duties and other than taxes within the purview of Article III) imposed by contracting
parties on or in connection with importation or exportation shall be limited in amount
to the approximate cost of services rendered and shall not represent an indirect
protection to domestic products or a taxation of imports or exports for fiscal purposes.

(b) The contracting parties recognize the need for reducing the number and
diversity of fees and charges referred to in subparagraph

22

(c) The contracting parties also recognize the need for minimizing the
incidence and complexity of import and export formalities and for decreasing and
simplifying import and export documentation requirements.

2. A contracting party shall, upon request by another contracting party or by the

CONTRACTING PARTIES, review the operation of its laws and regulations in the
light of the provisions of this Article.

3. No contracting party shall impose substantial penalties for minor breaches of

customs regulations or procedural requirements. In particular, no penalty in respect of
any omission or mistake in customs documentation which is easily rectifiable and
obviously made without fraudulent intent or gross negligence shall be greater than
necessary to serve merely as a warning.

4. The provisions of this Article shall extend to fees, charges, formalities and
requirements imposed by governmental authorities in connection with importation
and exportation, including those relating to:

Consular transactions, such as consular invoices and certificates

Quantitative restrictions

Licensing

Exchange control

Statistical services

Documents, documentation and certification

Analysis and inspection; and

Quarantine, sanitation and fumigation

Marks of Origin :-

1. Each contracting party shall accord to the products of the territories of other
contracting parties treatment with regard to marking requirements no less favourable
than the treatment accorded to like products of any third country.

23

2. The contracting parties recognize that, in adopting and enforcing laws and
regulations relating to marks of origin, the difficulties and inconveniences which such
measures may cause to the commerce and industry of exporting countries should be
reduced to a minimum, due regard being had to the necessity of protecting consumers
against fraudulent or misleading indications.

3. Whenever it is administratively practicable to do so, contracting parties should

permit required marks of origin to be affixed at the time of importation.

4. The laws and regulations of contracting parties relating to the marking of imported
products shall be such as to permit compliance without seriously damaging the
products, or materially reducing their value, or unreasonably increasing their cost.

5. As a general rule, no special duty or penalty should be imposed by any contracting

party for failure to comply with marking requirements prior to importation unless
corrective marking is unreasonably delayed or deceptive marks have been affixed or
the required marking has been intentionally omitted.

6. The contracting parties shall co-operate with each other with a view to preventing
the use of trade names in such manner as to misrepresent the true origin of a product,
to the detriment of such distinctive regional or geographical names of products of the
territory of a contracting party as are protected by its legislation. Each contracting
party shall accord full and sympathetic consideration to such requests or
representations as may be made by any other contracting party regarding the
application of the undertaking set forth in the preceding sentence to names of products
which have been communicated to it by the other contracting party.

Publication and Administration of Trade Regulations :-

1. Laws, regulations, judicial decisions and administrative rulings of general

application, made effective by any contracting party, pertaining to the classification or
the valuation of products for customs purposes, or to rates of duty, taxes or other
charges, or to requirements, restrictions or prohibitions on imports or exports or on
the transfer of payments therefore, or affecting their sale, distribution, transportation,
24

insurance, warehousing inspection, exhibition, processing, mixing or other use, shall

be published promptly in such a manner as to enable governments and traders to
become acquainted with them. Agreements affecting international trade policy which
are in force between the government or a governmental agency of any contracting
party and the government or governmental agency of any other contracting party shall
also be published. The provisions of this paragraph shall not require any contracting
party to disclose confidential information which would impede law enforcement or
otherwise be contrary to the public interest or would prejudice the legitimate
commercial interests of particular enterprises, public or private.

2. No measure of general application taken by any contracting party effecting an

advance in a rate of duty or other charge on imports under an established and uniform
practice, or imposing a new or more burdensome requirement, restriction or
prohibition on imports, or on the transfer of payments therefor, shall be enforced
before such measure has been officially published.

General Elimination of Quantitative Restrictions :-

1. No prohibitions or restrictions other than duties, taxes or other charges, whether

made effective through quotas, import or export licences or other measures, shall be
instituted or maintained by any contracting party on the importation of any product of
the territory of any other contracting party or on the exportation or sale for export of
any product destined for the territory of any other contracting party.

2. The provisions of paragraph 1 of this Article shall not extend to the following:

(a) Export prohibitions or restrictions temporarily applied to prevent or

relieve critical shortages of foodstuffs or other products essential to the
exporting contracting party;

(b) Import and export prohibitions or restrictions necessary to the

application of standards or regulations for the classification, grading or
marketing of commodities in international trade;

25

(c) Import restrictions on any agricultural or fisheries product,

imported in any form, necessary to the enforcement of governmental
measures which operate:

(i)

to restrict the quantities of the like domestic product permitted

to be marketed or produced, or, if there is no substantial
domestic production of the like product, of a domestic product
for which the imported product can be directly substituted; or

(ii)

to remove a temporary surplus of the like domestic product, or,

if there is no substantial domestic production of the like
product, of a domestic product for which the imported product
can be directly substituted, by making the surplus available to
certain groups of domestic consumers free of charge or at
prices below the current market level; or

(iii)

To restrict the quantities permitted to be produced of any

animal product the production of which is directly dependent,
wholly or mainly, on the imported commodity, if the domestic
production of that commodity is relatively negligible

Restrictions to Safeguard the Balance of Payments :-

1. Notwithstanding the provisions of paragraph 1 of Article XI, any contracting party,

in order to safeguard its external financial position and its balance of payments, may
restrict the quantity or value of merchandise permitted to be imported, subject to the
provisions of the following paragraphs of this Article.

2. (a) Import restrictions instituted, maintained or intensified by a contracting party

under this Article shall not exceed those necessary:

(i)

To forestall the imminent threat of, or to stop, a serious decline

in its monetary reserves; or

26

(ii)

In the case of a contracting party with very low monetary

reserves, to achieve a reasonable rate of increase in its reserves.

Due regard shall be paid in either case to any special factors which may be affecting
the reserves of such contracting party or its need for reserves, including, where special
external credits or other resources are available to it, the need to provide for the
appropriate use of such credits or resources.
(b) Contracting parties applying restrictions under sub-paragraph
(c) of this paragraph shall progressively relax them as such conditions improve,
maintaining them only to the extent that the conditions specified in that subparagraph still justify their application. They shall eliminate the restrictions
when conditions would no longer justify their institution or maintenance under
that subparagraph.

3. If there is a persistent and widespread application of import restrictions under this

Article, indicating the existence of a general disequilibrium which is restricting
international trade, the CONTRACTING PARTIES shall initiate discussions to
consider whether other measures might be taken, either by those contracting parties
the balance of payments of which are under pressure or by those the balance of
payments of which are tending to be exceptionally favourable, or by any appropriate
intergovernmental

organization, to

remove

the underlying causes

of

the

disequilibrium. On the invitation of the CONTRACTING PARTIES, contracting

parties shall participate in such discussions.

27

Chapter 3

28

Miscellaneous Protection techniques

How to protect intellectual property: common ground-rules
The second part of the TRIPS agreement looks at different kinds of intellectual
property rights and how to protect them. The purpose is to ensure that adequate
standards of protection exist in all member countries. Here the starting point is the
obligations of the main international agreements of the World Intellectual Property
Organization (WIPO) that already existed before the WTO was created:

the Paris Convention for the Protection of Industrial Property (patents,

industrial designs, etc)

the Berne Convention for the Protection of Literary and Artistic

Works(copyright).

Some areas are not covered by these conventions. In some cases, the standards of
protection prescribed were thought inadequate. So the TRIPS agreement adds a
significant number of new or higher standards.
Certain measures taken to achieve environmental protection goals may, by their very
nature, restrict trade and thereby impact on the WTO rights of other members. They
may violate basic trade rules, such as the non-discrimination obligation and the
prohibition of quantitative restrictions. This is why exceptions to such rules, as
contained in Article XX, are particularly important in the trade and environment
context. Article XX being an exception clause, it comes into play only once a measure
is found to be inconsistent with GATT rules.
First, the principle of non-discrimination stipulates that a member shall not
discriminate:

between like products from different trading partners (giving them equally
most favoured-nation or MFN status,

between its own and like foreign products (giving them national treatment,)

29

If trade-related environmental or health measures are to be consistent with WTO

rules, they cannot result in discrimination between like products. Therefore, the
principle of non-discrimination raises two key questions: Are products at issue like
products? If so, is the foreign product treated less favourably than the domestic
product or than another foreign product?

1. Anti-dumping actions:If a company exports a product at a price lower than the price it normally charges on
its own home market, it is said to be dumping the product. Is this unfair
competition? Opinions differ, but many governments take action against dumping in
order to defend their domestic industries. The WTO agreement does not pass
judgement. Its focus is on how governments can or cannot react to dumping it
disciplines anti-dumping actions, and it is often called the Anti-Dumping
Agreement. (This focus only on the reaction to dumping contrasts with the approach
of the Subsidies and Countervailing Measures Agreement.)
The legal definitions are more precise, but broadly speaking the WTO agreement
allows governments to act against dumping where there is genuine (material) injury
to the competing domestic industry. In order to do that the government has to be able
to show that dumping is taking place, calculate the extent of dumping (how much
lower the export price is compared to the exporters home market price), and show
that the dumping is causing injury or threatening to do so.
GATT (Article 6) allows countries to take action against dumping. The Anti-Dumping
Agreement clarifies and expands Article 6, and the two operate together. They allow
countries to act in a way that would normally break the GATT principles of binding a
tariff and not discriminating between trading partners typically anti-dumping
action means charging extra import duty on the particular product from the particular
exporting country in order to bring its price closer to the normal value or to remove
the injury to domestic industry in the importing country.
There are many different ways of calculating whether a particular product is being
dumped heavily or only lightly. The agreement narrows down the range of possible
options. It provides three methods to calculate a products normal value. The main
30

one is based on the price in the exporters domestic market. When this cannot be used,
two alternatives are available the price charged by the exporter in another country,
or a calculation based on the combination of the exporters production costs, other
expenses and normal profit margins. And the agreement also specifies how a fair
comparison can be made between the export price and what would be a normal price.
Calculating the extent of dumping on a product is not enough. Anti-dumping
measures can only be applied if the dumping is hurting the industry in the importing
country. Therefore, a detailed investigation has to be conducted according to specified
rules first. The investigation must evaluate all relevant economic factors that have a
bearing on the state of the industry in question. If the investigation shows dumping is
taking place and domestic industry is being hurt, the exporting company can
undertake to raise its price to an agreed level in order to avoid anti-dumping import
duty.
Detailed procedures are set out on how anti-dumping cases are to be initiated, how the
investigations are to be conducted, and the conditions for ensuring that all interested
parties are given an opportunity to present evidence. Anti-dumping measures must
expire five years after the date of imposition, unless an investigation shows that
ending the measure would lead to injury.
Anti-dumping investigations are to end immediately in cases where the authorities
determine that the margin of dumping is insignificantly small (defined as less than 2%
of the export price of the product). Other conditions are also set. For example, the
investigations also have to end if the volume of dumped imports is negligible (i.e. if
the volume from one country is less than 3% of total imports of that product
although investigations can proceed if several countries, each supplying less than 3%
of the imports, together account for 7% or more of total imports).
The agreement says member countries must inform the Committee on Anti-Dumping
Practices about all preliminary and final anti-dumping actions, promptly and in detail.
They must also report on all investigations twice a year. When differences arise,
members are encouraged to consult each other. They can also use the WTOs dispute
settlement procedure.

31

2. Subsidies and countervailing measures:This agreement does two things: it disciplines the use of subsidies, and it regulates the
actions countries can take to counter the effects of subsidies. It says a country can use
the WTOs dispute settlement procedure to seek the withdrawal of the subsidy or the
removal of its adverse effects. Or the country can launch its own investigation and
ultimately charge extra duty (known as countervailing duty) on subsidized imports
that are found to be hurting domestic producers.
The agreement contains a definition of subsidy. It also introduces the concept of a
specific subsidy i.e. a subsidy available only to an enterprise, industry, group of
enterprises, or group of industries in the country (or state, etc) that gives the subsidy.
The disciplines set out in the agreement only apply to specific subsidies. They can be
domestic or export subsidies.
The agreement defines two categories of subsidies: prohibited and actionable. It
originally contained a third category: non-actionable subsidies. This category existed
for five years, ending on 31 December 1999, and was not extended. The agreement
applies to agricultural goods as well as industrial products, except when the subsidies
are exempt under the Agriculture Agreements peace clause, due to expire at the
end of 2003.

Prohibited subsidies: subsidies that require recipients to meet certain export

targets, or to use domestic goods instead of imported goods. They are
prohibited because they are specifically designed to distort international trade,
and are therefore likely to hurt other countries trade. They can be challenged
in the WTO dispute settlement procedure where they are handled under an
accelerated timetable. If the dispute settlement procedure confirms that the
subsidy is prohibited, it must be withdrawn immediately. Otherwise, the
complaining country can take counter measures. If domestic producers are
hurt by imports of subsidized products, countervailing duty can be imposed.

Actionable subsidies: in this category the complaining country has to show

that the subsidy has an adverse effect on its interests. Otherwise the subsidy is
permitted. The agreement defines three types of damage they can cause. One
countrys subsidies can hurt a domestic industry in an importing country. They
32

can hurt rival exporters from another country when the two compete in third
markets. And domestic subsidies in one country can hurt exporters trying to
compete in the subsidizing countrys domestic market. If the Dispute
Settlement Body rules that the subsidy does have an adverse effect, the
subsidy must be withdrawn or its adverse effect must be removed. Again, if
domestic producers are hurt by imports of subsidized products, countervailing
duty can be imposed.
Some of the disciplines are similar to those of the Anti-Dumping Agreement.
Countervailing duty (the parallel of anti-dumping duty) can only be charged after the
importing country has conducted a detailed investigation similar to that required for
anti-dumping action. There are detailed rules for deciding whether a product is being
subsidized (not always an easy calculation), criteria for determining whether imports
of subsidized products are hurting (causing injury to) domestic industry, procedures
for initiating and conducting investigations, and rules on the implementation and
duration (normally five years) of countervailing measures. The subsidized exporter
can also agree to raise its export prices as an alternative to its exports being charged
countervailing duty.
Subsidies may play an important role in developing countries and in the
transformation of centrally-planned economies to market economies. Least-developed
countries and developing countries with less than $1,000 per capita GNP are
exempted from disciplines on prohibited export subsidies. Other developing countries
are given until 2003 to get rid of their export subsidies. Least-developed countries
must eliminate import-substitution subsidies (i.e. subsidies designed to help domestic
production and avoid importing) by 2003 for other developing countries the
deadline was 2000. Developing countries also receive preferential treatment if their
exports are subject to countervailing duty investigations. For transition economies,
prohibited subsidies had to be phased out by 2002.

33

3. Safeguards: emergency protection from imports:A WTO member may restrict imports of a product temporarily (take safeguard
actions) if its domestic industry is injured or threatened with injury caused by a surge
in imports. Here, the injury has to be serious. Safeguard measures were always
available under GATT (Article 19). However, they were infrequently used, some
governments preferring to protect their domestic industries through grey area
measures using bilateral negotiations outside GATTs auspices, they persuaded
exporting countries to restrain exports voluntarily or to agree to other means of
sharing markets. Agreements of this kind were reached for a wide range of products:
automobiles, steel, and semiconductors, for example.
The WTO agreement broke new ground. It prohibits grey-area measures, and it sets
time limits (a sunset clause) on all safeguard actions. The agreement says members
must not seek, take or maintain any voluntary export restraints, orderly marketing
arrangements or any other similar measures on the export or the import side. The
bilateral measures that were not modified to conform with the agreement were phased
out at the end of 1998. Countries were allowed to keep one of these measures an extra
year (until the end of 1999), but only the European Union for restrictions on
imports of cars from Japan made use of this provision.
An import surge justifying safeguard action can be a real increase in imports
(an absolute increase); or it can be an increase in the imports share of a shrinking
market, even if the import quantity has not increased (relative increase).
Industries or companies may request safeguard action by their government. The WTO
agreement sets out requirements for safeguard investigations by national authorities.
The emphasis is on transparency and on following established rules and practices
avoiding arbitrary methods. The authorities conducting investigations have to
announce publicly when hearings are to take place and provide other appropriate
means for interested parties to present evidence. The evidence must include
arguments on whether a measure is in the public interest.
The agreement sets out criteria for assessing whether serious injury is being caused
or threatened, and the factors which must be considered in determining the impact of
34

imports on the domestic industry. When imposed, a safeguard measure should be

applied only to the extent necessary to prevent or remedy serious injury and to help
the industry concerned to adjust. Where quantitative restrictions (quotas) are imposed,
they normally should not reduce the quantities of imports below the annual average
for the last three representative years for which statistics are available, unless clear
justification is given that a different level is necessary to prevent or remedy serious
injury.
In principle, safeguard measures cannot be targeted at imports from a particular
country. However, the agreement does describe how quotas can be allocated among
supplying countries, including in the exceptional circumstance where imports from
certain countries have increased disproportionately quickly. A safeguard measure
should not last more than four years, although this can be extended up to eight years,
subject to a determination by competent national authorities that the measure is
needed and that there is evidence the industry is adjusting. Measures imposed for
more than a year must be progressively liberalized.
When a country restricts imports in order to safeguard its domestic producers, in
principle it must give something in return. The agreement says the exporting country
(or exporting countries) can seek compensation through consultations. If no
agreement is reached the exporting country can retaliate by taking equivalent action
for instance, it can raise tariffs on exports from the country that is enforcing the
safeguard measure. In some circumstances, the exporting country has to wait for three
years after the safeguard measure was introduced before it can retaliate in this way
i.e. if the measure conforms with the provisions of the agreement and if it is taken as a
result of an increase in the quantity of imports from the exporting country.
To some extent developing countries exports are shielded from safeguard actions. An
importing country can only apply a safeguard measure to a product from a developing
country if the developing country is supplying more than 3% of the imports of that
product, or if developing country members with less than 3% import share
collectively account for more than 9% of total imports of the product concerned.
The WTOs Safeguards Committee oversees the operation of the agreement and is
responsible for the surveillance of members commitments. Governments have to
35

report each phase of a safeguard investigation and related decision-making, and the
committee reviews these reports.
4. National treatment, MFN, and Balanced Protection :As in GATT and GATS, the starting point of the intellectual property agreement is
basic principles. And as in the two other agreements, non-discrimination features
prominently: national treatment (treating ones own nationals and foreigners equally),
and most-favoured-nation treatment (equal treatment for nationals of all trading
partners in the WTO). National treatment is also a key principle in other intellectual
property agreements outside the WTO.
The TRIPS Agreement has an additional important principle: intellectual property
protection should contribute to technical innovation and the transfer of technology.
Both producers and users should benefit, and economic and social welfare should be
enhanced, the agreement says.
Some areas are not covered by these conventions. In some cases, the standards of
protection prescribed were thought inadequate. So the TRIPS agreement adds a
significant number of new or higher standards.
5. Copyright:The TRIPS agreement ensures that computer programs will be protected as literary
works under the Berne Convention and outlines how databases should be protected.
It also expands international copyright rules to cover rental rights. Authors of
computer programs and producers of sound recordings must have the right to prohibit
the commercial rental of their works to the public. A similar exclusive right applies to
films where commercial rental has led to widespread copying, affecting copyrightowners potential earnings from their films.
The agreement says performers must also have the right to prevent unauthorized
recording, reproduction and broadcast of live performances (bootlegging) for no less
than 50 years. Producers of sound recordings must have the right to prevent the
unauthorized reproduction of recordings for a period of 50 years.
36

6. Trademarks :The agreement defines what types of signs must be eligible for protection as
trademarks, and what the minimum rights conferred on their owners must be. It says
that service marks must be protected in the same way as trademarks used for goods.
Marks that have become well-known in a particular country enjoy additional
protection.
7. Geographical indications:A place name is sometimes used to identify a product. This geographical indication
does not only say where the product was made. More importantly, it identifies the
products special characteristics, which are the result of the products origins.
Well-known examples include Champagne, Scotch, Tequila, and Roquefort
cheese. Wine and spirits makers are particularly concerned about the use of placenames to identify products, and the TRIPS Agreement contains special provisions for
these products. But the issue is also important for other types of goods.
Using the place name when the product was made elsewhere or when it does not have
the usual characteristics can mislead consumers, and it can lead to unfair competition.
The TRIPS Agreement says countries have to prevent this misuse of place names.
For wines and spirits, the agreement provides higher levels of protection, i.e. even
where there is no danger of the public being misled.
Some exceptions are allowed, for example if the name is already protected as a
trademark or if it has become a generic term. For example, cheddar now refers to a
particular type of cheese not necessarily made in Cheddar, in the UK. But any country
wanting to make an exception for these reasons must be willing to negotiate with the
country which wants to protect the geographical indication in question.
The agreement provides for further negotiations in the WTO to establish a multilateral
system of notification and registration of geographical indications for wines. These
are now part of the Doha Development Agenda and they include spirits. Also debated

37

in the WTO is whether to negotiate extending this higher level of protection beyond
wines and spirits.
8. Industrial designs:Under the TRIPS Agreement, industrial designs must be protected for at least 10
years. Owners of protected designs must be able to prevent the manufacture, sale or
importation of articles bearing or embodying a design which is a copy of the protected
design.
9. Patents:The agreement says patent protection must be available for inventions for at least 20
years. Patent protection must be available for both products and processes, in almost
all fields of technology. Governments can refuse to issue a patent for an invention if
its commercial exploitation is prohibited for reasons of public order or morality. They
can also exclude diagnostic, therapeutic and surgical methods, plants and animals
(other than microorganisms), and biological processes for the production of plants or
animals (other than microbiological processes).
Plant varieties, however, must be protectable by patents or by a special system (such
as the breeders rights provided in the conventions of UPOV the International
Union for the Protection of New Varieties of Plants).
The agreement describes the minimum rights that a patent owner must enjoy. But it
also allows certain exceptions. A patent owner could abuse his rights, for example by
failing to supply the product on the market. To deal with that possibility, the
agreement says governments can issue compulsory licences, allowing a competitor
to produce the product or use the process under licence. But this can only be done
under certain conditions aimed at safeguarding the legitimate interests of the patentholder.
If a patent is issued for a production process, then the rights must extend to the
product directly obtained from the process. Under certain conditions alleged
infringers may be ordered by a court to prove that they have not used the patented
process.
38

An issue that has arisen recently is how to ensure patent protection for pharmaceutical
products does not prevent people in poor countries from having access to medicines
while at the same time maintaining the patent systems role in providing incentives
for research and development into new medicines. Flexibilities such as compulsory
licensing are written into the TRIPS Agreement, but some governments were unsure
of how these would be interpreted, and how far their right to use them would be
respected.
A large part of this was settled when WTO ministers issued a special declaration at
the Doha Ministerial Conference in November 2001. They agreed that the TRIPS
Agreement does not and should not prevent members from taking measures to protect
public health. They underscored countries ability to use the flexibilities that are built
into the TRIPS Agreement. And they agreed to extend exemptions on pharmaceutical
patent protection for least-developed countries until 2016. On one remaining question,
they assigned further work to the TRIPS Council to sort out how to provide extra
flexibility, so that countries unable to produce pharmaceuticals domestically can
import patented drugs made under compulsory licensing. A waiver providing this
flexibility was agreed on 30 August 2003.
10. Curbing anti-competitive licensing contracts:The owner of a copyright, patent or other form of intellectual property right can issue
a licence for someone else to produce or copy the protected trademark, work,
invention, design, etc. The agreement recognizes that the terms of a licensing contract
could restrict competition or impede technology transfer. It says that under certain
conditions, governments have the right to take action to prevent anti-competitive
licensing that abuses intellectual property rights. It also says governments must be
prepared to consult each other on controlling anti-competitive licensing.

39

Chapter 4

What Is a Tariff?
In simplest terms, a tariff is a tax. It adds to the cost of imported goods and is one of
several trade policies that a country can enact.

Why Are Tariffs and Trade Barriers Used?

40

Tariffs are often created to protect infant industries and developing economies, but are
also used by more advanced economies with developed industries. Here are five of the
top reasons tariffs are used:
1. Protecting Domestic Employment :- The levying of tariffs is often highly
politicized. The possibility of increased competition from imported goods can
threaten domestic industries. These domestic companies may fire workers or
shift production abroad to cut costs, which means higher unemployment and
a less happy electorate. The unemployment argument often shifts to domestic
industries complaining about cheap foreign labor, and how poor working
conditions and lack of regulation allow foreign companies to produce goods
more cheaply. In economics, however, countries will continue to produce
goods until they no longer have a comparative advantage (not to be confused
with anabsolute advantage).
2. Protecting Consumers :- A government may levy a tariff on products that it
feels could endanger its population. For example, South Korea may place a
tariff on imported beef from the United States if it thinks that the goods could
be tainted with disease.
3. Infant Industries :- The use of tariffs to protect infant industries can be seen
by the Import Substitution Industrialization (ISI) strategy employed by many
developing nations. The government of a developing economy will levy
tariffs on imported goods in industries in which it wants to foster growth.
This increases the prices of imported goods and creates a domestic market for
domestically produced goods, while protecting those industries from being
forced out by more competitive pricing. It decreases unemployment and
allows developing countries to shift from agricultural products to finished
goods.

Criticisms of this sort of protectionist strategy revolve around the cost

of subsidizing the development of infant industries. If an industry develops
without competition, it could wind up producing lower quality goods, and the
subsidies required to keep the state-backed industry afloat could sap
economic growth.
41

4. National Security :- Barriers are also employed by developed countries to

protect certain industries that are deemed strategically important, such as
those supporting national security. Defense industries are often viewed as
vital to state interests, and often enjoy significant levels of protection. For
example, while both Western Europe and the United States are industrialized,
both are very protective of defense-oriented companies.
5. Retaliation :- Countries may also set tariffs as a retaliation technique if they
think that a trading partner has not played by the rules. For example,
if France believes that the United States has allowed its wine producers to
call its domestically produced sparkling wines "Champagne" (a name specific
to the Champagne region of France) for too long, it may levy a tariff on
imported meat from theUnited States. If the U.S. agrees to crack down on the
improper labeling, France is likely to stop its retaliation. Retaliation can also
be employed if a trading partner goes against the government's foreign policy
objectives.

Non-tariff Barrier
Import licensing: keeping procedures clear
Although less widely used now than in the past, import licensing systems are subject
to disciplines in the WTO. The Agreement on Import Licensing Procedures says
42

import licensing should be simple, transparent and predictable. For example, the
agreement requires governments to publish sufficient information for traders to know
how and why the licences are granted. It also describes how countries should notify
the WTO when they introduce new import licensing procedures or change existing
procedures. The agreement offers guidance on how governments should assess
applications for licences.
Some licences are issued automatically if certain conditions are met. The agreement
sets criteria for automatic licensing so that the procedures used do not restrict trade.
Other licences are not issued automatically. Here, the agreement tries to minimize the
importers burden in applying for licences, so that the administrative work does not in
itself restrict or distort imports. The agreement says the agencies handling licensing
should not normally take more than 30 days to deal with an application 60 days
when all applications are considered at the same time.
Rules for the valuation of goods at customs
For importers, the process of estimating the value of a product at customs presents
problems that can be just as serious as the actual duty rate charged. The WTO
agreement on customs valuation aims for a fair, uniform and neutral system for the
valuation of goods for customs purposes a system that conforms to commercial
realities, and which outlaws the use of arbitrary or fictitious customs values. The
agreement provides a set of valuation rules, expanding and giving greater precision to
the provisions on customs valuation in the original GATT.
A related Uruguay Round ministerial decision gives customs administrations the right
to request further information in cases where they have reason to doubt the accuracy
of the declared value of imported goods. If the administration maintains a reasonable
doubt, despite any additional information, it may be deemed that the customs value of
the imported goods cannot be determined on the basis of the declared value.
Rules of origin: made in ... where?
Rules of origin are the criteria used to define where a product was made. They are
an essential part of trade rules because a number of policies discriminate between
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exporting countries: quotas, preferential tariffs, anti-dumping actions, countervailing

duty (charged to counter export subsidies), and more. Rules of origin are also used to
compile trade statistics, and for made in ... labels that are attached to products. This
is complicated by globalization and the way a product can be processed in several
countries before it is ready for the market.
The Rules of Origin Agreement requires WTO members to ensure that their rules of
origin are transparent; that they do not have restricting, distorting or disruptive effects
on international trade; that they are administered in a consistent, uniform, impartial
and reasonable manner; and that they are based on a positive standard (in other words,
they should state what does confer origin rather than what does not).
For the longer term, the agreement aims for common (harmonized) rules of origin
among all WTO members, except in some kinds of preferential trade for example,
countries setting up a free trade area are allowed to use different rules of origin for
products traded under their free trade agreement. The agreement establishes a
harmonization work programme, based upon a set of principles, including making
rules of origin objective, understandable and predictable. The work was due to end in
July 1998, but several deadlines have been missed. It is being conducted by a
Committee on Rules of Origin in the WTO and a Technical Committee under the
auspices of the World Customs Organization in Brussels. The outcome will be a
single set of rules of origin to be applied under non-preferential trading conditions by
all WTO members in all circumstances.
An annex to the agreement sets out a common declaration dealing with the
operation of rules of origin on goods which qualify for preferential treatment.
Investment measures: reducing trade distortions
The Trade-Related Investment Measures (TRIMs) Agreement applies only to
measures that affect trade in goods. It recognizes that certain measures can restrict and
distort trade, and states that no member shall apply any measure that discriminates
against foreigners or foreign products (i.e. violates national treatment principles in
GATT). It also outlaws investment measures that lead to restrictions in quantities
(violating another principle in GATT). An illustrative list of TRIMs agreed to be
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inconsistent with these GATT articles is appended to the agreement. The list includes
measures which require particular levels of local procurement by an enterprise (local
content requirements). It also discourages measures which limit a companys imports
or set targets for the company to export (trade balancing requirements).
Under the agreement, countries must inform fellow-members through the WTO of all
investment measures that do not conform with the agreement. Developed countries
had to eliminate these in two years (by the end of 1996); developing countries had
five years (to the end of 1999); and least-developed countries seven. In July 2001, the
Goods Council agreed to extend this transition period for a number of requesting
developing countries.
The agreement establishes a Committee on TRIMs to monitor the implementation of
these commitments. The agreement also says that WTO members should consider, by
1 January 2000, whether there should also be provisions on investment policy and
competition policy. This discussion is now part of the Doha Development Agenda.

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Chapter 5

FINDINGS:

The world trade Organization is an organization that intends to supervise

and liberalize international trade.
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The organization officially commenced on 1 January 1995 under

the Marrakech Agreement, replacing the General Agreement on Tariffs and
Trade (GATT), which commenced in 1948.

The organization deals with rule & regulation of trade between participating
countries; it provides a framework for negotiating and formalizing trade
agreements, and a dispute resolution process.

Goods and investment :- the Multilateral Agreements on Trade in Goods

including the GATT 1994 and the Trade Related Investment Measures
Services (TRIMS) :- the General Agreement on Trade in Services

Increasing awareness amongst Domestic Industry, business, agriculture,

service and other sectors on the impacts of trade laws arising out of WTO
agreement and other treaties as member of WTO.

Among the various functions of the WTO :- It oversees the implementation,

administration and operation of the covered agreements. It provides a forum
for negotiations and for settling disputes.

It construct a some duties which is useful for trade i.e :Restrictions to Safeguard the Balance of Payments, General Elimination of
Quantitative

Restrictions,

Publication

and

Administration

of

Trade

Regulations, Fees and Formalities connected with Importation and Exportation

etc..

They also create a miscellaneous protection techniques i.e :- copyright , How

to protect intellectual property , Anti-dumping actions, Subsidies and
countervailing measures, etc.!

SUGGESTIONS:The suggestions gives for specific proposals in 11 areas:

dispute settlement process,
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 agriculture,
services,
TRIMs,
TRIPS
textiles,
balance-of-payments provisions,
subsidies,
anti-dumping,
Technical barriers to trade and rules of origin.

CONCLUSION:The developed countries want that the underdeveloped countries observe some
restrictions relating to labour employment and ecological balance. Their argument is
that the underdeveloped countries use child labours or their social security measures
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are very poor. Further, these countries do not take measures to control pollution or to
maintain ecological balance. As a result, cost of production in such countries is low.
So, the developed countries should be allowed to impose tariffs or imports from
underdeveloped countries until the developing countries improve the condition of
labour and do not employ child labour. Thus, the developed countries tried to impose
many restrictions on the production process of theunderdeveloped countries. Thus, if
the developing countries try to protect their interest as a group, they may stand to gain
from the WTO system.If we consider both sides of a coin then we can conclude
that if the developed countries liberalise their import of agricultural goods, Indias
export of agricultural goods will increase. India has a comparative cost advantage in
the production of agricultural commodities. Hence Indias of such commodity is
expected to increase. On the other side according to the agreement of Trade Related
Investment Measures (TRIMs), there should not be any discrimination between
foreign and domestic investments. As a result, it will very difficult to control the
restrictive activities of the following investors. This agreement will also favour the
investors of the developed countries.

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Chapter 6

BIBLIOGRAPHY:

Economics of Global Trade and Finance

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Economics times

Business word

Understanding the WTO - Intellectual property: protection

WEBLIOGRAPHY:https://www.google.co.in
https://www.wikipedia wto.com
http://en.wikipedia.org/wiki/Agreement_on_Agriculture
http://en.wikipedia.org/wiki/Criticism_of_the_World_Trade_Organization
http://en.wikipedia.org/wiki/TRIPS_Agreement

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