GATT, the Uruguay Round, the WTO and trade liberalisation, and UNCTAD: the business view

1. GATT, 1947

The General Agreement on Tariffs and Trade was signed at Geneva in October 1947 by 23 countries, India among them, and applied provisionally from 1 January 1948. It was meant to sit under an International Trade Organization, but the ITO Charter (Havana, 1948) was never ratified by the United States, so GATT carried on alone as a contract among “contracting parties” with a small secretariat.

Principles: most-favoured-nation treatment (Article I), national treatment (Article III), tariffs as the only legitimate protection, with quotas generally banned (Article XI), tariff bindings, and consultation to settle disputes.

Rounds: eight negotiating rounds, from Geneva (1947) through Annecy, Torquay, Geneva (1956), Dillon (1960–61), Kennedy (1964–67), Tokyo (1973–79) and Uruguay (1986–94). Average tariffs of industrial countries on manufactures fell from around 40 per cent to under 5 per cent.

Weaknesses: provisional status; no coverage of services, investment or intellectual property; agriculture and textiles (the Multi-Fibre Arrangement) left outside its discipline; weak dispute settlement that a losing party could block; “grey-area” measures like voluntary export restraints.

2. The Uruguay Round (1986–1994)

Launched at Punta del Este, Uruguay, in September 1986 and concluded at Marrakesh, Morocco, on 15 April 1994, with 123 participating countries. It was the largest negotiation in trade history. Its results:

1. Creation of the World Trade Organization by the Marrakesh Agreement.
2. GATS: the General Agreement on Trade in Services — first rules for services trade.
3. TRIPS: minimum standards of protection for patents, copyright, trade marks and other intellectual property.
4. TRIMs: ban on investment measures that distort trade, such as local-content requirements.
5. Agreement on Agriculture: tariffication of farm barriers, cuts in domestic support and export subsidies.
6. Agreement on Textiles and Clothing: phasing out the Multi-Fibre Arrangement quotas by 1 January 2005.
7. Further tariff cuts and bindings; agreements on anti-dumping, subsidies, safeguards, SPS and TBT measures.
8. The Dispute Settlement Understanding, with binding rulings and an Appellate Body.

3. The WTO: objectives and functions

The WTO came into existence on 1 January 1995, with headquarters at Geneva. It has 166 members. India is a founder member.

Objectives (Preamble to the Marrakesh Agreement): raising standards of living; full employment; growth of real income and effective demand; expanding production of and trade in goods and services; optimal use of world resources consistent with sustainable development; and ensuring that developing countries, especially the least developed, secure a share in the growth of world trade.

Functions (Article III):

1. Administer and implement the multilateral and plurilateral trade agreements.
2. Provide a forum for trade negotiations.
3. Settle trade disputes under the Dispute Settlement Understanding.
4. Review members’ trade policies (Trade Policy Review Mechanism).
5. Cooperate with the IMF and World Bank for coherence in global economic policy.

It also gives technical assistance and training to developing countries. The Ministerial Conference, meeting at least once in two years, is the top body; the General Council acts between meetings.

4. How the WTO facilitates international business

• Predictability: bound tariffs mean a firm knows the maximum duty its goods will face.
• Non-discrimination: MFN and national treatment protect exporters against being singled out.
• Lower barriers: tariff cuts and the end of most quotas, including textile quotas, which helped Indian garment exporters.
• Services and IP: GATS opened markets for banking, telecom and IT; TRIPS gives brand owners and technology licensors protection abroad.
• Dispute settlement: a government can challenge another’s trade barrier on behalf of its industry.
• Transparency: notification of measures and trade policy reviews.
• Trade facilitation: the Trade Facilitation Agreement (in force 2017) simplifies customs procedures, cutting time and cost at borders.

5. Trade liberalisation and evaluation of the WTO

Gains: steady growth of world trade; a rules-based system that smaller countries can use against large ones; India has won and lost cases and uses the system actively.

Criticisms:

• Agriculture: rich-country farm subsidies remain large, while developing countries must defend food-security stockholding (India’s public stockholding issue).
• TRIPS raised the price of patented medicines; the Doha Declaration (2001) confirmed the right to compulsory licensing.
• The Doha Development Round (2001) has stalled.
• The Appellate Body has been unable to function since December 2019, because new members have not been appointed, which weakens dispute settlement.
• Labour and environment links, and new issues like e-commerce, divide members.

6. UNCTAD

The United Nations Conference on Trade and Development was set up in 1964 as a permanent organ of the UN General Assembly, with headquarters at Geneva. Its first Secretary-General was Raul Prebisch. It was the developing countries’ forum, where the Group of 77 was formed (1964), at a time when GATT was seen as a rich-country club.

Functions and contributions:

• The Generalised System of Preferences (GSP), agreed at UNCTAD II in New Delhi (1968): developed countries give lower or zero tariffs to developing-country exports without asking for reciprocity.
• Commodity policy: the Integrated Programme for Commodities and the Common Fund.
• The Global System of Trade Preferences among developing countries (1989).
• Research and data: the World Investment Report, Trade and Development Report and the statistics on FDI and multinationals.
• Technical help: the ASYCUDA customs computerisation system, investment policy reviews.

The conference meets every four years. Its weakness is that it makes recommendations rather than binding rules; the binding rules are in the WTO.

How this is examined

“Objectives and functions of the WTO” needs the date and seat, the Preamble objectives and the five Article III functions. “How the WTO facilitates international business” is the section 4 list with Indian examples. Short notes: GATT (1947, principles, rounds, weaknesses), Uruguay Round (dates, places, the eight results), UNCTAD (1964, Prebisch, GSP, functions, limits).