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MGT520 - International Business - Lecture Handout 29

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THE GENERAL AGREEMENT ON TARIFFS AND TRADE AND THE WTO:

The General Agreement on Tariffs and Trade (GATT) is a multilateral treaty designed to minimize trade barriers. GATT went into effect in 1948. It provided a forum for trade ministers to discuss policies and problems of common concern. GATT’s mission was adopted by the World Trade Organization (WTO), which replaced GATT in 1995.

The Role of the General Agreement on Tariffs and Trade:

  • The goal of GATT was to promote a free and competitive trading environment that benefits efficient producers. To that end, GATT sponsored international negotiations, called “rounds,” to reduce trade barriers (both tariff and nontariff). GATT successfully oversaw a reduction of tariffs from an average of over 40% in 1948 to approximately 3% today, and promoted a dramatic increase in world trade.
  • To ensure that international trade is conducted on a nondiscriminatory basis, GATT follows the most favored nation (MFN) principle which requires one nation to treat a second nation no worse than it treats any third nation. Any preferential treatment that is extended to one country must be extended to all countries. Thus, the principle implies multilateral rather than bilateral trade negotiations.

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MGT601 - SME Management - Lecture Handout 40

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WTO MINISTERIAL CONFERENCES

The apex body of WTO, the Ministerial conferences has a mandate to meet at least once every two years in order to strengthen the political guidance of WTO and enhance the prominence and credibility of its rules. Four ministerial conferences have been held till now and fifth one is scheduled for September 10-14 this year.

  • First Ministerial, held in Singapore 1996 declared the information technology as tariff free till the year 200. It emphasized the importance of regional trade agreements and talked about further liberalization of services. It was unable to resolve the controversies on issues like link between trade and labour standards.
  • Second Ministerial, held in Geneva on implementation issues, discussed the US and EU demand of making E-Commerce tariff free.
  • Third Ministerial, held in Seattle was disrupted by violent protests by anti-globalization organizations and conference failed to follow its proposed agenda.
  • Fourth Ministerial, convened at Doha in 2001 agreed to launch a new round of talks under the ‘Doha Development Agenda’ to take into account the areas of interest of developing countries.
  • Fifth Ministerial, held in Cancún, Mexico from 10 to 14 September 2003. The main task was to take stock of progress in negotiations and other work under the Doha Development Agenda.
  • Sixth Ministerial Conference was held in Hong Kong, China, 13–18 December 2005. In general, ministerial conferences are the WTO’s highest decision-making body, meeting at least once every two years and providing political direction for the organization

Doha Development Agenda

Doha Round of negotiations include critical issues such as production subsidies to Agriculture, TRIPs/Geographical Indications, access to generic medicines in case of public health crisis, requests/offers for services sector, antidumping agreement, revision and dispute settlement negotiations, market access to nonagricultural products. Special and Differential treatment of developing countries.

Though deadlines for reaching agreement on modalities for negotiations on most of the issues have been missed but still hopes are alive and these matters would be taken up at the forthcoming Ministerial in Cancun, Mexico.

Read more: MGT601 - SME Management - Lecture Handout 40