World Trade Organization (WTO), Evolution, Objectives, UPSC Notes

The World Trade Organization (WTO) is the premier international body that governs trade rules among nations. It provides a legal and institutional foundation for a rules-based multilateral trading system. Established on 1 January 1995 under the Marrakesh Agreement, the WTO replaced the earlier General Agreement on Tariffs and Trade (GATT), which was created in 1948 after World War II to encourage trade and economic recovery.

The WTO’s main goal is to ensure that trade flows are smooth, predictable, transparent, and fair. With 164 members as of 2025 (representing over 98% of world trade), the WTO serves as the backbone of the global economy.

Objectives of WTO

The WTO is guided by a set of objectives that balance trade liberalization with developmental concerns of poorer nations.

• Promote Free Trade: Reduce trade barriers like tariffs, quotas, and subsidies.

• Provide Negotiation Forum: Offer a structured platform for trade negotiations.

• Ensure Predictability: Establish clear and transparent rules so businesses can plan ahead.

• Settle Trade Disputes: Provide binding mechanisms to resolve conflicts.

• Support Developing Countries: Offer special and differential treatment to protect their economies.

Objective	Explanation
Promote Free Trade	Gradual reduction of tariffs, quotas, and trade barriers.
Negotiation Forum	Platform for multilateral and plurilateral agreements.
Predictability	Legal certainty through binding commitments.
Dispute Settlement	Rule-based settlement of disputes through the DSB.
Support Development	Special flexibilities and technical assistance for developing & least-developed countries.

Evolution of the World Trade Organization (WTO)

The WTO evolved as the successor to the General Agreement on Tariffs and Trade (GATT), which was established in 1947 to reduce tariffs and promote free trade among 23 nations. While GATT worked through multiple negotiation rounds like the Kennedy (1960s), Tokyo (1970s), and Uruguay Round (1986–94), its provisional nature and limited coverage led to calls for a stronger trade body. The Uruguay Round culminated in the Marrakesh Agreement (1994), which created the WTO in 1995 with wider jurisdiction over goods, services, and intellectual property.

• Post-War Need (1944–47):

  • After World War II, Bretton Woods institutions (IMF & World Bank) were set up.

  • A trade body was also proposed (International Trade Organization, ITO), but it failed.

  • As an interim arrangement, the General Agreement on Tariffs and Trade (GATT) was signed in 1947 at Geneva by 23 nations.

• GATT Era (1947–1994):

  • Nature: Not a permanent organization, but an agreement.

  • Aim: Tariff reduction, trade liberalization.

  • Rounds of Negotiation:

    • Geneva Round (1947): First tariff cuts.

    • Dillon Round (1960-61): Further tariff reductions.

    • Kennedy Round (1964-67): Introduced anti-dumping rules.

    • Tokyo Round (1973-79): Focused on non-tariff barriers.

    • Uruguay Round (1986-94): Comprehensive—covered agriculture, services, intellectual property → set stage for WTO.

• Creation of WTO (1995):

  • Marrakesh Agreement (1994) formally created WTO in 1995.

  • WTO replaced GATT but incorporated its principles.

  • Became a permanent institution with a legal identity.

  • Membership expanded from 123 (1995) to 164 (2024).

• Major Developments in WTO:

  • 1999 – Seattle Ministerial: Failed due to protests, rise of anti-globalization sentiment.

  • 2001 – Doha Development Agenda: Focused on developing countries’ concerns.

  • 2013 – Bali Package: Adopted Trade Facilitation Agreement.

  • 2015 – Nairobi Package: Eliminated agricultural export subsidies.

  • 2022 – Geneva Ministerial: Agreements on fisheries subsidies, pandemic response, and reforms.

• Key Shifts from GATT to WTO:

  • From Goods to Comprehensive Coverage: GATT covered only goods; WTO covers goods, services, agriculture, intellectual property.

  • From Provisional to Permanent: WTO became a formal global trade organization.

  • From Weak to Strong Dispute Resolution: WTO has binding dispute settlement mechanism.

• India’s Role:

  • Founding member of both GATT (1947) and WTO (1995).

  • Actively defended food security & subsidies in Bali (2013) and Nairobi (2015).

  • Advocated for reforms and development-oriented trade agenda in recent years.

Core Principles of WTO

The WTO’s working is based on a set of foundational principles:

1. Most-Favoured Nation (MFN): No member can discriminate between its trading partners.

2. National Treatment: Imported goods and services should be treated no less favorably than domestic ones.

3. Trade without Discrimination: Equal treatment ensures fairness.

4. Transparency: Members must publish and notify their trade regulations.

5. Binding Commitments: Tariff rates and market access offers are binding.

6. Special and Differential Treatment (SDT): Developing nations receive extra flexibility.

Organizational Structure of WTO

The WTO functions through several bodies that ensure effective decision-making.

• Ministerial Conference: Highest decision-making body; meets every two years.

• General Council: Conducts daily affairs; meets regularly in Geneva.

  • Acts as Dispute Settlement Body (DSB).

  • Acts as Trade Policy Review Body (TPRB).

• Special Councils: For trade in goods, trade in services, and TRIPS.

• Committees: Deal with agriculture, subsidies, anti-dumping, environment, regional trade agreements, etc.

WTO Agreements – The Legal Structure

The WTO rests on multiple binding agreements that collectively form the legal foundation of the global trading system.

These agreements are signed and ratified by all WTO members, making them legally binding.

Dispute Settlement Mechanism (DSM)

One of the most powerful features of the WTO is its Dispute Settlement Mechanism.

• It ensures that trade disputes are resolved through legal rules, not political or economic might.

• The Dispute Settlement Body (DSB) supervises cases, while an Appellate Body provides a final ruling.

Key Steps in Dispute Settlement:

1. Consultation & Mediation between disputing parties.

2. Panel Establishment to examine the complaint.

3. Panel Report submitted to DSB.

4. Appeal to Appellate Body (currently non-functional due to US blocking appointments).

5. Implementation of the ruling.

Crisis: Since 2019, the Appellate Body has been paralyzed, weakening enforcement. To bypass this, some members have created a temporary arbitration arrangement.

Trade Policy Monitoring & Assistance

• WTO conducts Trade Policy Reviews (TPRs) of member countries. These reviews ensure transparency and allow members to discuss each other’s policies.

• Developing and least-developed countries get technical assistance, training, and capacity building to integrate into global markets.

• Example: WTO’s aid-for-trade initiative helps poorer countries develop trade-related infrastructure.

WTO and Global Trade Trends

• WTO data shows that global merchandise trade is slowing down due to rising protectionism, geopolitical conflicts, and supply chain disruptions.

• Forecasts suggest global trade growth will remain below historical averages.

• Services trade (IT, finance, e-commerce) is growing faster than goods trade, shifting the balance of global commerce.

India and WTO

India is a founding member of GATT (1948) and thus became a WTO member in 1995. Its stance has always been pro-multilateralism, with emphasis on safeguarding developing countries’ interests.

India’s Key Concerns:

1. Agriculture & Food Security:

   • India supports public stockholding (PSH) for food security.

   • However, WTO rules under AoA restrict subsidies beyond a limit.

2. Special & Differential Treatment (SDT):

   • India demands continued flexibility in tariffs and subsidies for development needs.

3. TRIPS Agreement:

   • India defends its right to produce affordable generic medicines.

4. E-Commerce & Digital Trade:

   • India has been cautious about binding commitments, citing data sovereignty concerns.

5. Dispute Cases:

   • India has used WTO dispute settlement against US, EU, and others to protect its exports (e.g., steel, textiles).

Criticisms of WTO

Despite being a central trade institution, WTO faces sharp criticism:

• Bias towards Developed Nations: Rules on subsidies and intellectual property often favor rich countries.

• Failure of Doha Round: Negotiations launched in 2001 for development issues remain stalled.

• Appellate Body Paralysis: Weakens dispute settlement.

• Environmental & Labour Concerns Ignored: WTO focuses only on trade, not sustainability.

• Rise of Bilateralism: Countries increasingly prefer regional/bilateral deals, bypassing WTO.

Reforms Needed in WTO

For WTO to remain relevant, reforms are essential:

1. Revive Dispute Settlement Mechanism by restoring the Appellate Body.

2. Address Digital Trade & E-Commerce with updated rules.

3. Rebalance Agricultural Rules to allow food security programs in developing nations.

4. Improve Inclusiveness by ensuring developing nations’ concerns are prioritized.

5. Enhance Transparency in trade practices of large economies.

6. Address Non-Tariff Barriers like technical standards, environment, and labor.

Way Forward for India

• India must defend policy space for its agriculture, subsidies, and industrial policies.

• At the same time, it should embrace new opportunities in digital trade, services exports, and manufacturing.

• Building coalitions with other developing nations (like the G-33 group) strengthens India’s bargaining power.

• Active participation in WTO reforms will ensure India remains a voice for global South.

UPSC Prelims Practice Questions on WTO

Q. Consider the following statements regarding the World Trade Organization (WTO):

1. It was established in 1995 and replaced GATT.

2. It provides a permanent forum for negotiating trade agreements and settling disputes.

3. India is not a founding member of the WTO.

Which of the above statements is/are correct?

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2, and 3

Answer: (a)
Explanation: WTO replaced GATT in 1995 and provides a negotiation/dispute platform. India is a founding member, so statement 3 is incorrect.

Q. The term ‘Dispute Settlement Body (DSB)’ is sometimes mentioned in the news with reference to:

(a) International Court of Justice

(b) World Trade Organization

(c) International Monetary Fund

(d) United Nations Security Council

Answer: (b)
Explanation: The DSB is part of the WTO General Council and handles trade disputes.

Q. In the context of the WTO’s Agreement on Agriculture (AoA), the term ‘Amber Box’ refers to:

(a) Non-trade concerns in agriculture

(b) Trade-distorting domestic support measures

(c) Measures that are non-trade distorting

(d) Export subsidies that are exempted

Answer: (b)
Explanation: Amber Box refers to trade-distorting subsidies which are subject to reduction commitments.

Q. Which of the following is/are agreements under the WTO framework?

1. GATS

2. TRIPS

3. TRIMS

Select the correct answer using the code given below:

(a) 1 only

(b) 1 and 2 only

(c) 1, 2, and 3

(d) 2 and 3 only

Answer: (c)
Explanation: GATS (services), TRIPS (intellectual property), and TRIMS (investment measures) are WTO agreements.

FAQs on World Trade Organization (WTO)

Q1. What is the World Trade Organization (WTO)?
The WTO is an international organization that regulates global trade through rules and agreements. It ensures trade flows smoothly and resolves disputes among members.

Q2. When was the WTO established?
It was established on 1 January 1995 under the Marrakesh Agreement, replacing GATT (1948).

Q3. How many members does the WTO have?
As of 2024, the WTO has 164 members, representing more than 98% of global trade.

Q4. Where is the headquarters of WTO located?
The WTO is headquartered in Geneva, Switzerland.

Q5. What is the Dispute Settlement Body (DSB) of WTO?
The DSB is the WTO’s mechanism for resolving disputes. It supervises dispute panels and the appellate process, ensuring binding rulings.

Q6. What are TRIPS and GATS in WTO?

• TRIPS: Trade-Related Aspects of Intellectual Property Rights, regulating global IP laws.

• GATS: General Agreement on Trade in Services, covering liberalization of trade in services.

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