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In: Economics

explain the WTO principle rules

explain the WTO principle rules

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Expert Solution

WTO, or the World Trade Organization, is an inter-governmental body that disciplines trade between countries. It was formed in 1995, as a successor to the General Agreement on Trade and Tariffs (GATT). The GATT regulates trade in goods. The WTO was formed as an all-rounder organization which would form policies on all of international trade. In addition to trade in goods, it also has laws on trade in services, trade in agricultural goods and trade-related intellectual property rights.

Current WTO rules are codified in three agreements: The General Agreement on Tariffs and Trade (GATT), covering international trade in goods; the General Agreement on Trade in Services (GATS); and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The GATT was established after World War II, while the GATS and TRIPS both came into force in 1995.

The goal of these agreements is to foster an environment conducive to free trade. The most important rules mainly serve to do the following:

  • rein in anti-import tariffs;
  • ease customs procedures;
  • discourage domestic laws and taxes that may be classified as protection; and
  • reduce quotas and subsidies

The rules are based on a set of common principles. These include non-discrimination, freer trade, predictability, and promotion of economic development and growth.

The GATT is the foundation on which the WTO was built, and remains at the core of the organization. The GATT has evolved considerably over the nearly 70 years since it went into effect among 23 nations, growing in both membership and scope. The Uruguay Round, a pivotal set of multilateral negotiations from 1986 to 1994, marked a definitive point in the evolution from the “old GATT.”

Since the WTO’s General Agreement on Trade in Services came into force in 1995, services have become increasingly important to the global economy. To further liberalize international trade, developed economies have pursued new negotiations. One proposed pact is the Trade in Services Agreement (TiSA), being negotiated by what the WTO calls a “plurilateral” subset of its members (implying a smaller group than participate in multilateral trade agreements)Another issue is that GATS currently includes exemptions that were granted on a one-time basis when the agreement was forged (or when a particular country later joined the WTO).

Intellectual property (IP) is an area in which many see the need for more work. TRIPS covers some aspects of copyright and related rights; trademarks, including service marks; geographical indications, including appellations of origin; industrial designs and patents; and the design of integrated circuits. It includes standards, enforcement and dispute-settlement provisions that build on older accords such as the Paris Convention of 1883 (covering industrial patents, trademarks and other property). However, Digital IP and other aspects of the global digital economy are not sufficiently covered by the GATS and TRIPS


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