ITO, GATT, WTO, Ambar Box subsidies,Green Box subsidies, Blue Box Subsidies, Export subsidies, SPS

2. Basics of GATT & WTO
Structure of WTO Agreements
Agreement on Agriculture
Domestic Support
Sanitary and Phyto sanitary
measures(SPS)

3. FACT of WTO:
- Headquarter: Geneva, Switzerland
- Purpose: Regulated International trade
- Founded: 1st Jan. 1995.
- Membership: 164 member state
- Leader: Roberts Azeved
- After world War II( after 1945) , some countries will
decides that, to established the organization for Trade.

4. - A draft Agreement was prepared at Hawana
conference in 1948 for the establishment of
„International Trade Organization‟. This was
Hawana Charter. It was participated in 53 countries
& signed in 56 countries.
- In order to get implemented. Havana Charter was
required to get ratified by American Congress.
- In 1950 America made it clear that it will not ratify
the agreement. So ITO could not be implemented.
- And there was failed attempts to create an
“International Trade Organization” proposed by
„BRETTENWOODS‟

5. GATT:
- Temporary Agreement on multilateral tariff
reductions until the ITO was framed.
- Temporary agreement provided the basis for the
international trading system for 47 year.
- It was not an Organization but an agreement.
Participating countries were not celled members
but “CONTRACTING PARITIES”
- GATT was created in 30th Oct.1947 signed by 23
Nations.
- Between 1946 and 1994, the GATT provided a
framework multilateral trade negotiation.

6. - Then there was Uruguay round of
conference lasted between 1986 to 1994 (8
Year). It was the biggest negotiating
mandate on trade ever agree and thereby
ending with the birth of WTO.
- From 1947 to 1994, the GATT
CONTRACTING PARTIES organized „8‟
rounds of negotiations.

7. Year Place/Name Subjects
Covered
Parties
1947 Geneva Round Tariffs 23
1949 Annecy Round Tariffs 13
1951 Torquay
Round
Tariffs 38
1956 Geneva Round Tariffs 26
1960-
1961
Geneva,
Dillon Round
Tariffs 26
GATT Trade Round

8. Year Place/Name Subjects Covered Parties
1964
-1967
Geneva, Kennedy
Round
Tariffs and anti-
dumping
measures
62
1973
-1979
Geneva, Tokyo
Round
Tariffs, non-tariff
measures,
"framework"
agreements:
102
1986
-1994
Geneva, Uruguay
Round
Tariffs, non-tariff
measures, rules,
services, TRIPS,
dispute
settlement,
textiles,
agriculture,
Creation of WTO,
etc.
123

9. General Agreement on Trade and Tariff
Protocol for Provision Application:
 Applicable for Part II of the Agreement.
 Countries were free to implement only those
provisions of the agreement which did no
violate any existing law of the land.

10. What led to replacement of GATT with WTO
 GATT dealt with only Tariff barriers but by 1970s
Non Tariff Barriers has also started increasing.
 GATT dealt with trade in Goods . But by 1980‟s
Developed countries started having comparative
exchange in trade in Services.
 By 1980s Developing Countries started Pursing
Export- Oriented Growth.
 With these new demands, it was clear that agenda
of the GATT was going to expand well beyond the
traditional issues areas of tariffs on goods.

11. - The final Act concluding the Uruguay round
officially established the WTO regime was
signed 15th April 1994 during the ministerial
meeting at Marrakesh, Morocco and hence is
known as the Marrakesh Agreement.
- Since 1995, the WTO has performed the role of
an international organization for trade rules.

13. Formation of WTO:
Grand Bargain
--------------------------------------------------------------
Developed countries Developing countries
Agreed to include Trade allowed Inclusion of
In Agriculture & Service & Intellectual
Textile under Property Right under
WTO with some WTO.
Exception.

14. Drawbacks of GATT:
 Basically GATT is provisional agreement not an
organization.
 Less developed countries could get only little benefits
from GATT. Trade liberalization was confined mostly
to the developed countries.
 The textile and clothing industries were exempted
from GATT.
 GATT followed the principle of commodity based
negotiations. Developing countries mainly exporting
primary product could not effectively bargain with
developed countries.

16. What is WTO?
 WTO is the only Global International Organization
dealing with the rules of the trade between nations.
 At it‟s heart are the WTO agreement, negotiated &
signed by the bulk of the worlds trading nations &
rectified in their parliaments.
 The goals is to help producer of goods and services,
exporters & importers conduct their business.
 The WTO official commenced on 1st Jan. 1995, under
the Marrakesh Agreement signed by 123 nations on
15th April 1994, replacing the GATT, which
commenced in 1948.

17.  It is forum for Government to negotiate
trade agreements. It is a place for them to
settle trade disputes.
 WTO is place where member
governments try to sort out the trade
problems they face with each other.

18. Structure:
Today, the WTO has nearly 164 members
accounting for over 97% of world trade.

19. Objectives of WTO:
- To set & enforce rules for International trade.
- To provide forum for negotiating and monitoring
further trade liberalization.
- To increase the transparency of decision making
process.
- To Co-operate with other major international
economic institution involved in global economic
management.
- To help developing countries benefit fully from the
global trading system.

20. - To improve the standard of living of people in the
member countries.
- To ensure full employment and broad increase in
effective demand.
- To enlarge production and trade of goods.
- To increase the trade of services.
- To ensure optimum utilization of world resources.
- To protect the environment.
- To accept the concept of sustainable development.

21. Functions of WTO:
1. To implement rules and provisions related to
trade policy review mechanism.
2. To provide a platform to member countries to
decide future strategies related to trade and tariff.
3. To provide facilities for implementation,
administration and operation of multilateral and
bilateral agreements of the world trade.

22. 4. To administer the rules and processes related
to dispute settlement.
5. To ensure the optimum use of world
resources.
6. To assist international organizations such as,
IMF and IBRD for establishing coherence in
Universal Economic Policy determination.

23. The Fundamental Principles WTO.
Reciprocity:
Mutual lowering of trade barriers, thus
countries that lowered their tariffs could expect their
trading partners to do the same.
Most Favored Nation(MFN)
The MFN principle holds that the tariff
preference granted to one state must be granted to
all others in other words there could be no “favored
nation” among members.

24. Continue…………………
National Treatment:
National treatment means that foreign
goods are treated equally with domestic goods, and
that countries are not able to enact such policies
that give their domestic product any advantage
over foreign product.
eg. Mobile phone
1. Apple: Foreign goods(Import product)
2. Micromax: National goods(domestically
produce)
Equal taxes was given in both mobile
Company. It was treated as same.

25. Conference Year Place
I 9-13 Dec., 1996 Singapore
II 18-20 May 1998 Geneva
(Switzerland)
III 30 Nov.-З Dec., 1999 Seattle (USA)
IV 9-14 Nov., 2001 Doha (Qatar)
V 10-14 Sep., 2003 Cancun (Mexico)
VI 13-18 Dec.. 2005 Hong Kong
VII 30 Nov-2Dec., 2009 Geneva
(Switzerland)
Table: WTO Ministerial Conference:

26. Three divisions of WTO:
1. Ministerial level conference:
Meet once in two years to take principal
policy decisions.
2. General council :
Consists of all members, handles day to
day work of WTO.
3. Bodies :
(a) Dispute settlement Body, (DSB).
(b) Trade policy Review Body (TPRB).

27. WTO Agreements:
 Uruguay Round negotiations which included a major
revision of the original General Agreement on
Tariffs and Trade (GATT).
 The Uruguay Round also created new rules for
dealing with trade in services, relevant aspects of
intellectual property, dispute settlement and trade
policy reviews.
 The complete set runs to some 30,000 pages
consisting of about 30 agreements and separate
commitments (called schedules) made by individual
members in specific areas such as, lower customs
duty rates and services market-opening.

28.  Each country receives guarantees that its
exports will be treated fairly and consistently
in other countries‟ markets.
 Each country promises to do the same for
imports into its own market.
 The system also gives developing countries
some flexibility in implementing their
commitments.

29. Issues with India:
 India has been member of GATT since 1948 hence
it was party to Uruguay round and a found
member of WTO.
 China joined WTO only in 2001 and Russia had to
wait till 2012.

30.  Matter of food stockpile developing countries is of
particular interest to India, which has, through its
poorly conceived public distribution system
created a vast stockpile of food grain. Actions to
add to or trade parts of this stockpile have big
effect on world prices and thus can severally
distort the market.
 Developed countries such as the US, meanwhile,
are unwilling to cede India and other developing
nations the right to create a food stockpile through
domestic procurement in perpetuity.

31. Agreement Establishing WTO
(Near about total 60 Agreements are there.)
----------------------------------------------------------
Annex 1 Annex 2 Annex 3 Annex 4
1. Annex 1a Dispute Trade policy Plurilateral
2. Annex 1b Settlement Review Agreement
3. Annex 1c

32. Agreement Establishing WTO
----------------------------------------------------------
Annex 1
1. Annex 1a - General Agreement on Tariff and
Trade - GATT 1994
2. Annex 1b - General Agreement on Trade in
Service GATs
3. Annex 1c - Trade Related Intellectual Property
TRIPs Right

33. Included Provision of GATT 1947 but expanded its scope
to Non Tariff Barriers
General Agreement on Tariff and Trade- 1994
Asked All member State to submit Individual Tariff Schedules
(Tariff schedule –In any Country list submit goods – Write max
Tariff (It means decide fixed Tariff eg. 30 % or 40 %))
Tariff Binding Developed
Countries
Developing
Countries
Before WTO 78 % 22 %
After WTO 99 % 72 %

34. For Example:
India – 04 Goods are Imported i.e. A, B, C & D.
B Included
C Tariff - Tariff Bound
D Schedule (Tariff is fixed)
A - Not included - Tariff is not fixed
Schedule (It depends on India.
Tariff is to be increases
or decreases)

35. Agreement on Agriculture(AOA)
Agreement on Application of Sanitary and
Phyto sanitary measures(SPS)
Agreement on Textiles & Clothing(ATC)
Trade Related Investment Measures(TRIMs)
Agreement on Technical Barriers to Trade(TBT)
General Agreement on Trade and Tariff 1994

36. Liberalize Agriculture Trade in 3 significant Respects
Agreement of Agriculture(AOA):
Three Pillers of Agricultural Trade Policy
Market Access Domestic Support
Mechanism
Export subsidies
Conversion of All non tariff imports restriction into
Tariffs ------ Tariffication
All Tariff were required to be bound
After binding the Tariffs it should be gradually reduced
over a period of several years
Market Access

37. Tariffication:
For Example :
- In AOA, any country is to be signed, this
country is removed in Non Tariff barriers.
- It is converted to Non-Tariff to Tariff barriers.
India Imports to America
AOA Signed in America
Tariff is to be decided fixed

38. Domestic Support Mechanism
Domestic Supports(Subsidies)
--------------------------------------------------------
Direct Support
Directly stimulate
Production & Trade of
Agril. Product
Indirect Support
Trade Distorting – Amber
box subsidy – Highly
Restricted
Green box & Blue box
subsidy – Non Restricted
Don‟t Affect production
and Trade directly

39. Direct Support:
 Government gives the subsidies directly to
farmers.
For example: Government has Lowering the
prices of seed, fertilizers, insecticide etc. for
the main motive, for increasing farmers
production.

40. Meaning of Indirect Support:
Purchase Inputs in Market price i.e. Diesel,
petrol, fertilizer, Insecticide &
Government has to pay the subsides in direct
farmers account .
1. Farmers has to decide/depends, spends money.
For eg. Irrigation or petrol or purchase vehicle or
Electricity etc.
2. Government gives the Training to Farmers for
increasing production.

41. In Indirect subsidies divided in two groups
1. Green box 2. Blue box
No any interference & restriction in WTO

42. Direct Supports(Subsidies):-
Ambar Box subsidy:
 Most trade distorting
 These subsides have to go away.
For eg. MSP – By developing Nations
Cost of cultivation Selling price falls
1000/- 900/-
Govt. has announce MSP 1200/-
Rs. 300 subsidy

43. Country Ambar box subsidy allowed
Developed
countries
5 % of total value of Agricultural
Production in 1986-88(base year)
Developing
countries
10 % of total value of Agricultural
Production in 1986-88(base year)
For eg. 1986 – 88
Average price Todays price
Rs. 500 Rs. 1200 per qtl
Because India‟s Production cost is very low in
base year. India demanded that, to consider the base
year 1999 – 2000.

44. Developing Nations 10 % :
10 % subsidy
 Total production 10 Tonnes - 1 Tonnes
Developed Nation 5 % :
5 % subsidy
 Total production 500 Tonnes - 25 Tonnes
 Subsidy must be calculated on 100 % produce and
not on quantity bought by the government at MSP.
Conclusion:
 It is Illogical it meanse not logically.
 MSP should be added in Green box subsidy.

45.  But India provided the farmers, more than 10 %
subsidy.
 Then Developed country says that, India has to get
violation on agreement.
 India has to be demanded to change the base year
& create pressure of WTO. And not to be signed in
any new agreement.
 Till date, India has not signed in “Trade facilitation of
Agreement” (TFA) (This agreement is more
benefited in Developed country).

46. Green Box subsidy:
 Not trade distorting.
 No limitation (Can gives as much as you can).
 Generally cash payment.
 Government spending on,
Research,
Disease control & Indirect Impact
Infrastructure ( Increasing Production)
 No direct effect on production.
 Govt. support given, to farmers during the crop
failure.
eg. Flood, natural calamities

47.  Government has to provide incentive for
environment protection.
For eg. Delhi pollution:
In the state of Punjab & Haryana farmers,
after harvesting of crops, residual are there. And
farmers is burn this residual.
But Govt. has to encourage point of view,
the farmers, gives the training for preparing Biogas
or manure, obviously production is enhanced. And
hence the Indirect effect in Delhi Pollution.
Government main motive is to be Environment
Protection.

48. Green Box subsidy used in two ways i.e.
Public Service & Direct payment.
Public Service Direct Payment
R & D Income Guarantee & Security
programmes
Marketing Crop Insurance(From Govt.)
Training Natural Calamities
Domestic Food Aid Environment Protection

49. Who spends and How much spends
in Green box Subsidy
Developed Nations Developing Nations
Strong financially Lack of financial resources
Developing nations
demanded the, these
subsidy are brought
under reducible
categories
Not effective
eg. Horse is not to be walk. It is
not possible the running
But in case of Horse is to be
walk, it is possible to the
running.
And hence indirectly Green box
subsidy is distorting the trade

50. Blue Box Subsidy:
Less trade Distorting:
 Basically Ambar box subsidy but they tend to limit
the production.
For eg. Subsidies that don‟t increase with production.
 Subsidies linked with acreage/No. of animal.
 This type of subsidies given by the Norway, Iceland,
Solvania.
Total land:
50 % crop
cultivation
50 %
Livestock

51. Export Subsidies
Developed countries to reduce Export subsidy by 36 %
over 6 years based on the 1986 to 1990 base period.
Developing countries to reduce Export subside by 36 %
over 10 years based on the 1986 to 2004 base period.
For example:
America Export India
Cost of Corn Rs. 500/- Sold in India Rs. 300/-
American Govt. paid in Rs. 200/- Subsidy by farmers.
Hence, America corn available in cheap rate in
India. This is not fair deal.

52. Agreement on Application of Sanitary and
Phyto sanitary measures(SPS)
 Article 20 of the General Agreement on Tariffs and
Trade (GATT) allows governments to act on trade in
order to protect human, animal or plant life or
health, provided they do not discriminate or use this
as disguised protectionism.
 In addition, there are two specific WTO agreements
dealing with food safety and animal and plant health
and safety and with product standards in general.

53. Key features of SPS measures Agreement
 SPS measures to be based on scientific risk
assessment.
 Countries should base their SPS measures on
International standards.
 Countries may have higher level of SPS measures
but shall be based on scientific risk assessment.
 Transparency: All proposed, new and changed
measures are to be notified by members to the SPS
Committee of WTO Secretariat.

54. Problem faced by India in Implementing the SPS
provisions
 Lack of adequate time to adapt to SPS measures and
adequate advance warning about the new measures.
 High cost of adoption.
 Unwillingness on the part of the developed countries to
accept equivalent measures of developing countries.
 Lack of adequate technical assistance to developing
countries particularly for creating infrastructure
necessary for ensuring quality testing standards.
 Ineffective participation in the activities of the
international standardizing bodies leading to standards
getting fixed by default.

55. Strategy Recommended for Future
 Upgradation of standard within India.
 Building-up scientific evidence to counter
unreasonable SPS measures.
 Exporters should examine WTO-compatibility of
health and sanitary regulations/product standards.
 Close-co-ordination between Government and
Exporters regarding specific cases.
 Need for framing of standards for manufacture,
production units/processes, monitoring
contaminants, sampling procedures and additives.

56. Thank you
Dr. Devyanee K. Nemade
Assistant Professor
Department of Agricultural
Economics & Statistics
Dr. PDKV, Akola