GATT and the WTO: history, achievements, objectives, functions, agreements (TRIPS, TRIMS) and India

1. Brief history of GATT

After the Second World War, the Bretton Woods Conference (1944) created the IMF and the World Bank. A third body, the International Trade Organization, was planned under the Havana Charter (1948) but never came into being because the United States Congress did not approve it. What survived was the General Agreement on Tariffs and Trade, signed at Geneva on 30 October 1947 and applied provisionally from 1 January 1948 by 23 contracting parties, India among them. GATT was a treaty with a small secretariat, not an organisation.

Its basic principles were:

• Most-favoured-nation treatment (Article I): a concession given to one member must be given to all;
• National treatment (Article III): imported goods, once inside, are treated no worse than domestic goods;
• Protection through tariffs only: quantitative restrictions generally prohibited (Article XI);
• Tariff binding and reduction through negotiation;
• consultation and settlement of disputes.

The eight rounds

2. Achievements and failures of GATT

Achievements

• Large reductions in tariffs on industrial goods across eight rounds, and a great expansion of world trade.
• Established MFN and non-discrimination as the norm of trade relations.
• Provided a forum for negotiation and the peaceful settlement of disputes.
• Concessions for developing countries: Part IV on trade and development (1965) and the Enabling Clause (1979), which permits the Generalised System of Preferences.
• Tokyo Round codes on subsidies, anti-dumping, technical barriers and government procurement.
• The Uruguay Round, which created the WTO.

Failures

• Agriculture and textiles stayed largely outside its discipline (textiles under the Multi-Fibre Arrangement, 1974).
• Rise of non-tariff barriers and “grey area” measures such as voluntary export restraints.
• Weak dispute settlement: a ruling needed consensus, so the losing party could block it.
• Benefits went mainly to developed countries; services and intellectual property were not covered.

3. The World Trade Organization

The WTO was established by the Marrakesh Agreement signed on 15 April 1994 and came into being on 1 January 1995, with its headquarters at Geneva. Unlike GATT, it is a permanent international organisation with legal personality, and it covers goods, services and intellectual property. It has 166 members (after Comoros and Timor-Leste joined in 2024). India is a founding member.

Objectives (from the Preamble to the Marrakesh Agreement)

1. raising standards of living;
2. ensuring full employment and a large and steadily growing volume of real income and effective demand;
3. expanding the production of and trade in goods and services;
4. optimal use of world resources in accordance with sustainable development, protecting and preserving the environment;
5. ensuring that developing countries, especially the least developed, secure a share in the growth of international trade;
6. reducing tariffs and other barriers and eliminating discriminatory treatment, through an integrated, more durable multilateral trading system.

Functions (Article III, Marrakesh Agreement)

1. Administering and implementing the multilateral and plurilateral trade agreements.
2. Providing a forum for negotiations on trade relations.
3. Administering the Dispute Settlement Understanding: panels, the Appellate Body, and adoption of reports by negative consensus.
4. Administering the Trade Policy Review Mechanism: periodic review of each member’s trade policies.
5. Co-operating with the IMF and the World Bank for coherence in global economic policy.
6. In practice, technical assistance and training for developing countries.

Structure

The Ministerial Conference (meets at least once every two years) is the top body; the General Council runs day-to-day work and also sits as the Dispute Settlement Body and the Trade Policy Review Body; under it are the Councils for Trade in Goods, Trade in Services and TRIPS; the Secretariat is headed by a Director-General. Decisions are normally taken by consensus.

4. The main agreements

• GATT 1994 and agreements on goods: Agriculture, Sanitary and Phytosanitary Measures, Textiles and Clothing (which phased out the MFA quotas by 1 January 2005), Technical Barriers to Trade, TRIMS, Anti-dumping, Subsidies and Countervailing Measures, Safeguards, Customs Valuation, Rules of Origin, Import Licensing.
• Agreement on Agriculture: market access (tariffication), reduction of domestic support (amber box; blue and green boxes exempt) and of export subsidies.
• GATS: the General Agreement on Trade in Services, covering four modes of supply.
• TRIPS and the DSU, and the Trade Policy Review Mechanism.

TRIPS: Agreement on Trade-Related Aspects of Intellectual Property Rights

• Sets minimum standards of protection that every member must provide for copyright and related rights, trademarks, geographical indications, industrial designs, patents, layout-designs of integrated circuits and undisclosed information.
• Patents for products and processes in all fields of technology, for 20 years (Article 33); plant varieties may be protected by an effective sui generis system (Article 27(3)(b)).
• Applies MFN and national treatment to intellectual property, and requires effective enforcement.
• Transition: developing countries had until 2000, and until 2005 to introduce product patents in fields such as pharmaceuticals.
• The Doha Declaration on TRIPS and Public Health (2001) confirmed the right to grant compulsory licences to protect public health.

India complied through the Patents (Amendment) Acts of 1999, 2002 and 2005 (product patents from 1 January 2005), the Geographical Indications of Goods Act, 1999, the Protection of Plant Varieties and Farmers’ Rights Act, 2001, and the Trade Marks Act, 1999.

TRIMS: Agreement on Trade-Related Investment Measures

• Applies only to investment measures that affect trade in goods.
• Prohibits measures inconsistent with national treatment (GATT Article III) or the ban on quantitative restrictions (Article XI). Its illustrative list includes local content requirements (a foreign investor must use a minimum share of domestic inputs), trade-balancing requirements (imports limited to a proportion of exports), and foreign exchange balancing restrictions.
• Members had to notify and phase out such measures (developing countries within five years).

5. WTO and India

Gains

• Assured MFN market access and a rules-based system that protects a middle-sized trader against unilateral pressure.
• The end of textile quotas in 2005 opened markets for Indian garments.
• Growth in services exports (software, IT-enabled services) under GATS.
• Access to dispute settlement: India has used it both as complainant and respondent.
• Reforms that India undertook (lower tariffs, removal of import licensing) improved efficiency and competitiveness.

Concerns

• Agriculture: high subsidies in developed countries; India’s public stockholding for food security, protected by the interim “peace clause” agreed at Bali (2013).
• TRIPS and medicines: product patents raise drug prices; India has used compulsory licensing and section 3(d) of the Patents Act to limit evergreening.
• Quantitative restrictions: India lost the dispute brought by the United States (1999) and removed its balance-of-payments quantitative restrictions by April 2001.
• Pressure on new issues: e-commerce, investment facilitation, labour and environment standards.
• The Appellate Body has been unable to function since December 2019 because appointments are blocked, weakening dispute settlement.

How this is examined

For “objectives and functions of WTO”, begin with two lines of history (GATT 1947 to the Marrakesh Agreement), then list six objectives and five functions, and close with the structure. If “agreements” is added, list the main agreements and explain TRIPS and TRIMS. For a 10-mark note on the WTO, compress the same material and add India’s gains and concerns. A note on “GATT” needs section 1 and the achievements and failures.