[Islam-Online-Economy]

The World Trade Organization (WTO), which replaced GATT on January 1, 1996, is a new trade body with much wider scope and powers. First, the legal status and enforcing power of the earlier GATT was very weak. It could use only moral persuasion to redress disputes over dumping or discriminatory tariffs that may be imposed by powerful traders who had special laws like super 301. The WTO has greater powers for arbitration and enforcement of its principles. The speed and automaticity of dispute settlement procedures are greatly increased. Second, as agreed upon by 117 nations after 7 years of negotiations under the Uruguay Round, the purview of the WTO extends into several new areas. The salient features of the WTO charter are listed below.
Trade Liberalization:
The intrinsic and prime motive of the new organization is indeed liberalization of trade through scaling down tariff rates and improving other trade distorted measures-cutting tariffs on industrial goods over the next 5-10 years by 40 percent on the average. Some high-tech industrial items will have tariffs cut by 70 to 100 percent.
MFA (Multi-Fiber Agreement):
The textile quota restrictions under the MFA, which was introduced and brought under the purview of the GATT in 1974 for regulating world trade in textiles and clothing, will be phased out in 10 years-16 percent on January 1, 1995, 17 percent in 1998, 18 percent in 2002, and the remaining 49 percent by January 1, 2005.
Trade in Agricultural Commodities:
Agriculture was the most crucial and long debated sector in the Uruguay Round of talks. Agriculture, which remained virtually untouched in all of the GATT's earlier negotiations, has come for the first time under WTO purview. Strong market orientation to trade of agricultural commodities has been envisaged through (a) reducing direct export subsidy by 36 percent and indirect support to farmers by 20 percent over a 6-year period; (b) converting all nontariff barriers into tariffs and then steadily reducing the latter by 36 percent over the next 6 years in the case of developed countries and by 24 percent over the next 10 years in the case of developing countries; and (c) requiring countries with farm markets closed to foreigners to import at least 3 percent of domestic consumption, which will rise to 5 percent over a period of 6 years.
Trade in Services:
Like trade in agriculture, trade in services has also been brought under GATT/WTO purview for the first time. The most favored nation (MFN)treatment clause has been extended to trade in services. It prevents countries from discriminating among foreign suppliers of services. The services include financial, telecommunications, transportation, construction, audio visual, tourism, and professional services, as well as the movement of workers.
Trade-Related Intellectual Property Rights (TRIPS):
The owners of intellectual property have been improved and protected by providing patents for 20 years and copyrights for 50 years.
The Agreement provides for improved levels of protection for the rights of the owners of all types of intellectual property. These levels are achieved principally by requiring countries to i) grant national treatment, ii) provide certain minimum standards of protection for all types of intellectual property, and iii) institute procedures and remedies under national laws so that foreigners can enforce their rights.2
Trade-Related Investment Measures (TRIMS):
TRIMS refer to those measures which governments apply to local investors. These include the use of local materials, the obligation to export a certain proportion of output, the obligation of the investor to export to certain countries or regions, trade balancing or the use of export earnings to pay for imports, the commitment to supply a certain proportion of output to the local market, etc. Many countries, especially the developed countries, regard TRIMS as a form of protection because these measures suppress market forces, divert trade, and encourage inefficient production. On the other hand, many developing countries maintain that TRIMS are necessary for economic development. The Agreement requires the elimination of certain restrictive measures (such as local content and foreign exchange balancing requirements) that violate the GATT principles of national treatment and prohibition of quantitative restrictions.3
Anti-Dumping Safeguards:
The rules allow a government to put tariffs on imports that are being dumped, especially when it is causing serious injury to domestic industry.
Subsidies:
In order to enhance the competitiveness of their products in the international market, nearly all governments provide export subsidies. However, the efficient suppliers in the international market complain about export subsidies because they suppress the international prices of their products. The Agreement defines three categories of subsidies: i) the prohibited subsidies-those contingent on export performance or the use of domestic over imported goods; ii) the actionable subsidies-those that have demonstrably adverse effects on other member countries; and iii) the non-actionable subsidies, including those provided (with stipulated limitations) to industrial research and precompetitive development activity in disadvantaged regions, or to the existing facilities in order to enable them to adapt themselves to new environmental requirements. These subsidies will be prohibited except for civil aircraft, programs of industrial research, and precompetitive development activity defined in the agreement on agriculture. The Agreement also puts restrictions on the use of countervailing measures introduced in response to competitors' subsidies.4
Technical Barriers:
The Agreement seeks to ensure that technical negotiations and standards, as well as the testing and certification procedures, do not create unnecessary barriers to trade. To this end, it encourages countries to use international standards, but does not include a harmonization of standards. At the same time, it does recognize the right of countries to establish protection-for example, for human, animal, or plant life, health, and the environment-at levels they consider appropriate, and specifies that they should not be prevented from ensuring that their desired standards are met.5