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Assignment # 01
International Trade & Finance

Submitted By: Submitted To:
Mr. Hassan Kamran








MBA (5
TH
Semester)

Wajid Ali
Haifa Saleem
Hassan Naseer
Shakeel Aslam
Nabita Ishtiaq
Rana Tassadaq

3335
3336
3328
3338
3353
3316


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Question:
What is mean by WTO and how do you differentiate it from GATT. What
functions and facilities WTO is performing which were not available in GATT
and also discuss its applicability in Pakistan?


The World Trade Organization (WTO):

The World Trade Organization (WTO) deals with the global rules of trade
between nations. Its main function is to ensure that trade flows as smoothly,
predictably and freely as possible.

OR

WTO is an organization for liberalizing trade, a forum for governments to
negotiate trade agreements and a place for them to settle trade disputes.



Above all, its a negotiating forum Essentially the WTO is a place where
member governments go to try to sort out the trade problems they face with each
other. The first step is to talk. The WTO was born out of negotiations, and
everything the WTO does is the result of negotiations.
Its a set of rules At its heart are the WTO agreements, negotiated and signed
by the bulk of the worlds trading nations. These documents provide the legal
ground-rules for international commerce. They are essentially contracts, binding
governments to keep their trade policies within agreed limits.
And it helps to settle disputes This is a third important side to the WTOs
work. Trade relations often involve conflicting interests. Agreements, including
those painstakingly negotiated in the WTO system, often need interpreting. The
most harmonious way to settle these differences is through some neutral procedure
based on an agreed legal foundation. That is the purpose behind the dispute
settlement process written into the WTO agreements.
Born in 1995, but not so young ... The WTO began life on 1 January 1995, but
its trading system is half a century older. Since 1948, the General Agreement on
Tariffs and Trade (GATT) had provided the rules for the system.
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WTO is not a Free trade institution It permits tariffs and other forms of
protection but only in limited circumstances.

The Way We Differentiate WTO From GATT:

The GATT was a set of rules, a multilateral agreement with no institutional
foundation & with only a small associated secretariat. The WTO is a
permanent institution with its own secretariat.

The GATT was applied on a "Provisional basis" even if, after more than 40
years, governments chose to treat it as a permanent commitment. The WTO
commitments are full and permanent.

The GATT rules applied to trade in merchandise goods. In addition to
goods, the WTO covers trade in services and trade related aspects of
intellectual property.

While GATT was multilateral instrument by the 1980s many new
agreements had been added and therefore selective, nature. The agreements
which constitute the WTO are almost all multilateral and thus involve
commitments for the entire membership.

The WTO dispute settlement system is faster, more automatic and thus much
less susceptible to blockages than the old GATT system.

The WTO is more global in its membership than the GATT.

WTO is a watchdog of international trade; regularly examine the trade regimes
of individual members. Trade disputes that cannot be solved through bilateral
talks are adjudicated under the WTO dispute settlement 'court'. The WTO is also a
management consultant for world trade. Its economists keep a close watch on the
pulse of the global economy and provide studies on the main trade issues of the
day. The mandate of the WTO includes trade in goods, trade in services, trade
related in investment measures and trade related intellectual property rights. A
number of simple and fundamental principles run throughout all of the instruments
which, together, make up the multilateral trading system.
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They are;
Trade without discrimination.
Predictable and growing access to markets.
Promoting fair competition.
Encouraging development and economic reform.


Functions of WTO which were not available in GATT:
WTO is the embodiment of the Uruguay Round results and the successor to
GATT. It is not a simple extension of GATT but it completely replaces its
predecessor and has a very different character. As on 2
nd
March 2013, the
membership of the WTO stood at 159.While 76 governments became members of
the WTO on its first day. The present membership accounts for more than 90 per
cent of world trade. Many more countries have requested to WTO. The WTO is
based in Geneva, Switzerland.

Its essential functions are as follows;
To administer the trade policy mechanism.

To achieve greater coherence in global economic-policy making cooperation
with World Bank and IMF.

To provide a forum for negotiations among its members concerning the
multilateral trade relations in matters dealt with in the agreements.

To administer the understandings on Rules and Procedures governing the
settlement of disputes.

To introduce the idea of 'sustainable development in relation to the optimal
use of the world resources and the need to protect and preserve the
environment in a manner consistent with the various levels of national
economic development.

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To recognize that there is a need for positive efforts to ensure that the
developing countries, especially, the least developed countries secure a
better share of the growth of the international trade.

WTO And PAKISTAN:

Pakistan is the participant of the Uruguay Round and also the WTO. As a member
it has to abide by the WTOs objective of putting an end to the import duties which
have been reduced from maximum over 80 percent 9 years ago to 30 percent at
present. So what does it mean for the many industries that have taken long years to
take root in Pakistan.
To start with, Pakistan still basically remains an agriculture-based country
where cotton and textiles make up 60 percent of export earnings and rice
also plays an important part. United States is one of the top trading partners
of Pakistan and offers a good test case of the relevance of the promises of
fair and equitable trade the WTO assures.

Pakistan has faced many anti-dumping and quota related problems with the
US for exporting its cotton and textile products. While WTO claims to work
only as a mediator, developed countries like Pakistan have found a
resourceful way of interpreting the WTO agreements to protect their
industries.
For instance, the US has opened its market in textiles and clothing
selectively, which does not benefit the developing countries. Not
surprisingly, the U.S. has resorted to use the transitional safeguard measures
to protect its domestic industries from sudden increases in imports by
introducing its own Rules of Origin to identify where a textile or clothing
product comes from, changing the conditions of competition and adding to
the restrictions against the low-cost textile exports from Pakistan and other
developing countries.
The US influence on the WTO agricultural policies will have a devastating
effect on the developing countries like Pakistan.
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This is mainly due the US-led WTO policies, which promote food
availability through trade thus discouraging countries like Pakistan to attain
self-sufficiency.

The situation is further worsened that many countries including Pakistan
have scarce foreign exchange to lift the food from the international market
even if it is available at a comparatively low price.

The industries producing a range of finished products in Pakistan are still
heavily dependent on imported basic and raw materials. The increasing cost
of utilities, it is needless to mention frequent increase in power, gas and
petroleum prices during last 18 months in particular and last few years in
general have pushed the production costs to an uncompetitive level. This
has resulted in less demand locally due primarily to a declining purchasing
power, increasing unemployment level and a spreading sense of uncertainty.
It has also taken its toll on exports by rendering products uncompetitive
against such traditional rivals as India, China and Bangladesh etc.