Countries trade with each other every day. They need common rules. Who makes these rules? The World Trade Organization (WTO). It is the only global body that deals with the rules of trade between nations. It also settles trade disputes. Exams ask about its birth, its headquarters, its agreements and India's issues. This post explains them in simple words. It ends with 15 previous year questions.
Key Points (Quick Revision)
- The WTO was set up on 1 January 1995. It replaced the GATT of 1947.
- It was created by the Marrakesh Agreement of 1994, at the end of the Uruguay Round.
- Its headquarters are in Geneva, Switzerland.
- Its top body is the Ministerial Conference, which meets at least once every two years.
- India is a founding member of both the GATT and the WTO.
1. From GATT to WTO
After the Second World War, countries wanted to cut tariffs and open trade. In 1947, 23 countries signed the General Agreement on Tariffs and Trade (GATT). India was one of them.
The GATT was an agreement, not an organisation. It worked through rounds of talks. The eighth and last round was the Uruguay Round, from 1986 to 1994.
The Uruguay Round ended with the Marrakesh Agreement, signed in Morocco in April 1994. This agreement created the WTO. The WTO started work on 1 January 1995.
The GATT still exists. The updated GATT 1994 is now one of the WTO's agreements on trade in goods.
2. What the WTO does
The WTO has four main jobs.
- Administers trade agreements. It runs the rules that members have agreed to.
- Forum for negotiations. Members meet here to make new trade rules.
- Settles disputes. If one member thinks another is breaking the rules, it can file a case.
- Reviews trade policies. It checks each member's trade policy from time to time.
The WTO also helps developing countries with training and technical help.
3. Structure of the WTO
| Body | What it does |
|---|---|
| Ministerial Conference | The top decision-making body. Trade ministers of all members. Meets at least once every two years. |
| General Council | Runs the WTO between conferences. Ambassadors of members in Geneva. Also meets as the Dispute Settlement Body and the Trade Policy Review Body. |
| Councils for goods, services and TRIPS | Look after the three main areas of rules. |
| Secretariat | Based in Geneva. Headed by the Director-General, who serves a four-year term. |
Decisions in the WTO are taken by consensus. Every member has one vote, but voting is rare. This gives small countries a voice, but it also makes decisions slow.
The WTO has more than 160 members. New members join through accession talks. China joined in 2001 and Russia in 2012.
4. The basic principles
- Most Favoured Nation (MFN). If a member gives a trade benefit to one country, it must give the same to all members. No favourites.
- National treatment. Once a foreign good enters the market, it must be treated the same as a local good.
- Lower trade barriers. Tariffs should be cut and bound. Quotas should be removed.
- Predictability. Members bind their tariffs, so traders know the rules will not change suddenly.
- Fair competition. Rules against dumping and unfair subsidies.
- Special treatment for developing countries. They get more time and more flexibility.
5. The main WTO agreements
| Agreement | Covers |
|---|---|
| GATT 1994 | Trade in goods |
| GATS | General Agreement on Trade in Services - banking, telecom, tourism and so on |
| TRIPS | Trade-Related Aspects of Intellectual Property Rights - patents, copyrights, trademarks |
| TRIMS | Trade-Related Investment Measures |
| Agreement on Agriculture | Farm subsidies, market access and export subsidies |
| SPS Agreement | Sanitary and phytosanitary measures - food safety and plant and animal health |
| TBT Agreement | Technical barriers to trade - product standards |
| Trade Facilitation Agreement | Simpler customs procedures; agreed at Bali in 2013, in force from 2017 |
The Agreement on Agriculture puts farm subsidies into boxes. The Amber Box has subsidies that distort trade and must be cut. The Green Box has subsidies that do not distort trade and are allowed. The Blue Box has subsidies linked to limits on production.
6. Rounds and conferences you must know
- Doha Round (2001). Launched at the Doha Ministerial Conference in Qatar. Also called the Doha Development Agenda. It aimed to help developing countries, but it has not been completed.
- Bali (2013). The ninth conference. It agreed the Trade Facilitation Agreement and a peace clause on public stockholding of food grains, which protects India's food security programme.
- Nairobi (2015). Members agreed to end export subsidies in agriculture.
- Geneva (2022). The twelfth conference. It agreed a deal on fisheries subsidies and a temporary TRIPS waiver for Covid-19 vaccines.
- Abu Dhabi (2024). The thirteenth conference. Members extended the moratorium on customs duties on e-commerce, but there was no deal on agriculture.
7. Dispute settlement and its crisis
The WTO's dispute system is called the jewel in its crown. A member files a case. A panel hears it. Either side can appeal to the Appellate Body, which has seven members.
Since December 2019, the Appellate Body has not been working. The United States blocked the appointment of new members. Appeals now go into a void. Many countries have asked for reform.
8. India and the WTO
India is a founding member and an active voice for developing countries. Its main concerns are:
- Food security. India buys grain at minimum support prices for its public distribution system. The WTO counts this as a trade-distorting subsidy. India wants a permanent solution on public stockholding.
- Farm subsidies of rich countries. India wants these cut first.
- Fisheries. India wants protection for its small fishermen in the subsidies deal.
- E-commerce duties. India has opposed a permanent ban on customs duties on electronic transmissions.
- TRIPS. India uses the flexibilities of TRIPS to make affordable generic medicines.
India has also faced cases at the WTO, such as on solar panels, sugar subsidies and ICT tariffs.
9. Previous year questions
- When was the World Trade Organization established? – 1 January 1995
- Where are the headquarters of the WTO? – Geneva, Switzerland
- The WTO replaced which organisation or agreement? – GATT (General Agreement on Tariffs and Trade), 1947
- Which agreement created the WTO? – Marrakesh Agreement, 1994
- Which round of GATT talks led to the creation of the WTO? – Uruguay Round (1986-94)
- What is the top decision-making body of the WTO? – Ministerial Conference
- How often does the WTO Ministerial Conference meet? – At least once every two years
- What does TRIPS stand for? – Trade-Related Aspects of Intellectual Property Rights
- What does GATS stand for? – General Agreement on Trade in Services
- In which year was the Doha Development Round launched? – 2001
- The Trade Facilitation Agreement was agreed at which Ministerial Conference? – Bali, 2013
- Which WTO principle requires equal treatment of all member countries? – Most Favoured Nation (MFN)
- How many members does the Appellate Body of the WTO have? – Seven
- The agreement on fisheries subsidies was reached at which conference? – Geneva, 2022 (MC12)
- Which box of farm subsidies under the Agreement on Agriculture is considered non-trade-distorting? – Green Box
10. How to revise this topic
Start with the dates: GATT 1947, Uruguay Round 1986-94, Marrakesh 1994, WTO 1 January 1995.
Next, fix the structure: Ministerial Conference, General Council, Secretariat in Geneva, Director-General.
Then learn the agreements table: GATT, GATS, TRIPS, TRIMS, AoA, SPS, TBT, TFA.
Finally, memorise the conferences: Doha 2001, Bali 2013, Nairobi 2015, Geneva 2022, Abu Dhabi 2024, and India's food security issue.
11. Frequently Asked Questions
What is the WTO?
The World Trade Organization is the global body that makes and enforces the rules of trade between nations. It was set up on 1 January 1995 and is based in Geneva. It replaced the GATT of 1947.
What is the difference between GATT and WTO?
GATT was only an agreement on trade in goods, run through rounds of talks from 1947. The WTO is a permanent organisation with a secretariat, a dispute settlement system and rules on goods, services and intellectual property.
What is the Most Favoured Nation principle?
If a WTO member gives a trade benefit, such as a lower tariff, to one country, it must give the same benefit to all other members. It is the first rule of the GATT.
What is the Doha Round?
The round of WTO trade talks launched at Doha in 2001, also called the Doha Development Agenda. It aimed to help developing countries but has not been completed.
What is India's main issue at the WTO?
A permanent solution on public stockholding of food grains. India buys grain at minimum support prices for its food security programme, which the WTO rules count as a trade-distorting subsidy. A peace clause agreed at Bali in 2013 protects it for now.
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