Question No. 1 - IBO-03 - India’s Foreign Trade - Master of Commerce (M.Com)

Solutions to Assignments 

IBO-03 - India’s Foreign Trade

Master of Commerce (M.Com) - 1st Year 

Question No. 1 What do you mean by WTO? What is its role in in world trade? Describe India’s efforts for integrating itself with the world trade.

What Is the World Trade Organization (WTO)?

Created in 1995, the World Trade Organization (WTO) is an international institution that oversees the global trade rules among nations. It superseded the 1947 General Agreement on Tariffs and Trade (GATT) created in the wake of World War II.

The WTO is based on agreements signed by the majority of the world’s trading nations. The main function of the organization is to help producers of goods and services, as well as exporters and importers, protect and manage their businesses. As of 2021, the WTO has 164 member countries, with Liberia and Afghanistan the most recent members, having joined in July 2016, and 25 “observer” countries and governments.

The WTO is essentially an alternative dispute or mediation entity that upholds the international rules of trade among nations. The organization provides a platform that allows member governments to negotiate and resolve trade issues with other members. The WTO’s main focus is to provide open lines of communication concerning trade among its members.

For example, the WTO has lowered trade barriers and increased trade among member countries. On the other hand, it has also maintained trade barriers when it makes sense to do so in the global context. Therefore, the WTO attempts to provide negotiation mediation that benefits the global economy.

Once negotiations are complete and an agreement is in place, the WTO then offers to interpret that agreement in case of a future dispute. All WTO agreements include a settlement process, whereby the organization legally conducts neutral conflict resolution.

On Feb. 15, 2021, the WTO’s General Council selected two-time Nigerian finance minister Ngozi Okonjo-Iweala as its director-general. She is the first woman and the first African to be selected for the position. She took office on March 1, 2021, and her term will end in August 2025.

No negotiation, mediation, or resolution would be possible without the foundational WTO agreements. These agreements set the legal ground rules for international commerce that the WTO oversees. They bind a country’s government to a set of constraints that must be observed when setting future trade policies. These agreements protect producers, importers, and exporters while encouraging world governments to meet specific social and environmental standards.

Role of WTO

1. Progressive opening and regulation of markets

The WTO's mission is to open markets gradually while ensuring that rules are respected.  The origin of the organization dates back to the end of World War II when the idea of peaceful cooperation among peoples was emerging. In 1947, a number of countries decided to open up their markets on the basis of common principles, and founded the WTO's predecessor, the General Agreement on Tariffs and Trade (GATT). In the current round of trade negotiations, the WTO is seeking to make further advances in equitable trade.

2. The WTO acts as conductor, tribunal, monitor and trainer

a. Orchestra conductor

International trade is governed by very precise rules developed by the WTO's members. Countries must apply these rules when trading with one another. The WTO acts as the orchestra conductor, ensuring that rules are respected. The WTO was founded in 1995, but its origins date back to 1947 and the creation of the GATT. Since then, WTO members have adapted these rules to keep up with new developments. For example, services have developed considerably since the 1980s, and have now become one of the most important economic sectors. As a result, WTO members established rules governing international trade in services. Adapting or changing the principles of international trade means reaching consensus among WTO members through a round of negotiations. The latest round   the ninth since 1947   was launched in 2001

b. Tribunal

One of the main roles of the WTO is to settle disputes between its members. The WTO plays the role of trade tribunal, where members may file complaints against other members who fail to abide by the principles of international trade. There are three stages to dispute settlement. To begin with, the disputing countries try to settle their differences by themselves. If that fails, the case is decided by a panel made up of three experts, which issues a ruling. That ruling may be appealed. Once a definitive ruling has been issued, the losing party must comply. If it does not, it is liable to sanctions. Since 1995, over 400 complaints have been filed by WTO members.

c. Monitor

The WTO regularly reviews the trade policies of its members. These reviews assess whether WTO members are abiding by WTO rules and measure the impact of their domestic policies on international trade. The purpose of these reviews is not so much to solve problems as to prevent them from occurring in the first place.

d. Trainer

The WTO provides training programmes for government officials from developing countries   for example, ministry staff or customs officials. The WTO currently spends about 35 million Swiss francs annually on these programmes.  Africa is the main beneficiary, followed by Asia and Latin America. In 2011, approximately 26 per cent of training activities took place in Africa.

India's Integration with WTO

The government on Tuesday said that India’s permanent mission to the World Trade Organization, the Centre for Trade and Investment Law (CTIL) of the Indian Institute of Foreign Trade, and the Centre for Trade and Economic Integration of The Graduate Institute, Geneva have signed a tripartite Memorandum of Understanding to begin collaboration towards research and capacity-building in the field of international trade law and policy.

The MoU seeks to provide academic and research opportunities to the professional staff of CTIL and the officials of the Indian government in the field of international trade and investment law, and would establish collaboration channels between CTIL and CTEI while the mission will play a facilitative role for activities.

“For the next three years, various capacity-building programmes and activities will be carried out under the MoU to enhance the understanding of the government officials and CTIL’s research staff and academics on contemporary issues of international trade and build support for India’s positions on international trade and investment law,” the commerce and industry ministry said in a statement.

The MoU aims to enhance India’s capacity in formulating its foreign trade policy and contribute towards ensuring stability in the global trade regime.

Besides exchange of faculties and staff for study, research or teaching purposes, there will also be an internship programme for CTEI students at CTIL and submission of India focused projects to CTIL/CTEI TradeLab, a clinical legal education project on trade and investment law.