BBA 3rd Year International Economic Institutions Long Question Answer Notes Study Material Modal paper Semester wise Notes Last 3 Year examination papers solved Unit wise content
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(Long Answer Questions)
Q.1. Discuss the mission, functions and principles of WTO.
Ans. The mission of WTO: The WTO’s stated goal is to improve the welfare of the people of its member countries, specifically by lowering trade barriers and providing a platform for the negotiation of trade. Its main mission is “to ensure that trade flows as smoothly, predictably and freely as possible. This main mission is further specified in certain core functions serving and safeguarding five fundamental principles, which are the foundation of any multilateral trading system,
Functions of WTO: WTO performs the following functions:
1. Provides a forum for further negotiations for trade liberalization in the framework of the various agreement concluded.
2. Administers the new dispute settlement procedure.
3. Establishes and directs a trade policy review mechanism so as to examine the trade policies and practices of the member countries and to suggest measures of reform.
4. Cooperating with other international institutions involved in global policymaking,
5. Undertakes research and publishes information for the international community.
6. The WTO shall administer the ‘Trade Policy Review Mechanism’.
7. With a view to achieving greater coherence in global economic policymaking, the WTO shall cooperate, as appropriate, with the IMF and IBRD and its affiliated agencies. Principles of the Trading System: The WTO establishes a framework for trade policies. It does not define or specify outcomes. That is, it is concerned with setting the rules of the trade policy games. Five principles are of particular importance in understanding both, the pre-1994 GATT and the WTO :
1. Non-Discrimination : It has two major components: the most favoured nation (MFN) rule and the national treatment policy. Both are embedded in the main WTO rules on goods, services and intellectual property, but their scope and nature differ across these areas. The MFN rule requires that a WTO member must apply the same conditions on all trade with other WTO members, i.e. a WTO member has to grant the most favourable conditions under which it allows trade in a certain product type to all other WTO members.
2. Reciprocity : It reflects both a desire to limit the scope of free-riding that may arise because of the MFN rule and a desire to obtain better access to foreign markets. A related point is that for a nation to negotiate, it is necessary that the gain from doing so be greater than the gain available from unilateral liberalisation; reciprocal concessions intend to ensure that such gains will materialise.
3. Binding and Enforceable Commitments : The tariff commitments made by WTV members in a multilateral trade negotiation and on accession are enumerated in a schedule (list) of concessions. These schedules establish “ceiling bindings”: a country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade. If satisfaction is not obtained, the complaining country may invoke the WTO dispute settlement procedures.
Transparency: The WTO members are required to publish their trade regulations, to maintain institution allowing for the review of administrative decisions affecting trade, to respond quests for information by other members and to notify changes in trade policies to the WTO. These internal transparency requirements are supplemented and facilitated by periodic country-specific reports (trade policy reviews) through the Trade Policy Review Mechanism (TPRM). The WTO system also tries to improve predictability and stability, discouraging the use of quotas and other measures used to set limits on quantities of imports.
5. Safety Valves : In specific circumstances, governments are able to restrict trade. There are three types of provisions in this direction :
(a) Articles allowing for the use of trade measures to attain non-economic objectives.
(b) Articles aimed at ensuring “fair competition”.
(c) Provisions permitting intervention in trade for economic reasons.
Q.2. Discuss the organisational structure of WTO.
Ans. Organisational Structure : The organisational structure of the WTO is designed and based on four hierarchical levels. The hierarchies from the top to bottom are as follows:
Highest Level: Ministerial Conference
The topmost decision-making body of the WTO is the Ministerial Conference, which is brought into action after every two years. It brings together all members of the WTO, all of which are countries or separate customed territories. The ministerial conference can make decisions on all matters under any of the multilateral trade agreements.
Second Level : General Council
The daily work of the ministerial conference is handled by three groups: the General Council, the Dispute Settlement Body and the Trade Policy Review Body. All three consist of the same membership, representatives of all WTO members – but each meets under different rules.
1. The General Council : The general council is the WTO’s highest level decision making body in Geneva, meets regularly to carry out the functions of the WTO. It has representatives (usually ambassadors or equivalent) from all member governments and has the authority to act on behalf of the ministerial conference which is held after every two years. The council acts on behalf of the ministerial council on all of the WTO affairs.
2. The Dispute Settlement Body: The dispute settlement body is made up of all member governments, usually represented by ambassadors or equivalent.
3. The WTO General Council : The WTO general council meets as the Trade Policy Review Body (TPRB) to undertake trade policy reviews of members under the TRPM. The TPRB is thus open to all WTO members.
Third Level : Councils for Trade
The councils for trade work under the general council. There are three councils-council for trade in goods, council for trade related aspects of intellectual property rights and council for trade in services – each council works in different fields. Apart from these three councils, six other bodies report to the general council reporting on issues such as trade and development, environmentalism, regional trading arrangements and administrative issues.
1. Council for Trade in Goods : The workings of the General Agreement on Tariffs and Trade (GATT) which covers international trade in goods, has the responsibility of the council for trade in goods. It is made up of representatives from all WTO member countries.
2. Council for Trade Related Aspects of Intellectual Property Rights : Information on intellectual property in the WTO, news and official records of the activities of the TRIPS council and details of the WTO’s work with other international organisations in the field.
3. Council for Trade in Services: The council for trade in services operates under the guidance of the general counsel and is responsible for overseeing the functioning of the General Agreement on Trade in Services (GATS). It is open to all WTO members and can create subsidiary bodies as required.