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MGT520 - International Business - Lecture Handout 30

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GATT AND WTO

The World Trade Organization:

The World Trade Organization (WTO) was founded in 1995, and is comprised of 146 member countries and 30 observer countries. The WTO has three primary goals: to promote trade flows by encouraging nations to adopt non-discriminatory and predictable trade policies, to reduce remaining trade barriers through multilateral negotiations, and to establish impartial procedures for resolving trade disputes among members.

Problem Sectors:

One challenge facing the WTO is dealing with sectors of the economy such as agriculture and textiles that most nations protect. Groups including the Cairns Group (a group of major agricultural exporters) have pressured the WTO to ensure that the Uruguay Round policies dealing with agricultural trade are implemented according to schedule. Similarly, developing countries are monitoring the dismantling of the Multifibre Agreement (MFA), which created a complex array of quotas and tariffs on trade in textiles and apparel.
The General Agreement on Trade in Services (GATS):
The WTO is also focusing on reducing barriers to trade in services. One approach currently in use is the principle of national treatment, in which a country treats foreign firms the same as it treats domestic firms. The WTO began negotiating a new GATS agreement in 2000, but progress has been slow.
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS):
The third challenge for the WTO is intellectual property rights (patents, copyrights, trademarks, and brand names). Efforts to improve intellectual property right protection, agreed upon at the Uruguay round, will be phased in over the space of a decade. In 2001, the WTO launched the Doha round of negotiations. Several contentious issues are slated to be discussed, including agriculture trade, intellectual property rights, and trade in services.
Trade-Related Investment Measures Agreement (TRIMS):
The TRIMS agreement is a start toward eliminating national regulations on FDI, which may distort or restrict trade. It affects trade balancing rules, foreign exchange access, and domestic sales requirements.
Enforcement of WTO Decisions:
The WTO, unlike its predecessor GATT, has more power to punish violators of the WTO rules. Most experts feel that the WTO has been successful in implementing its policies during its first years of existence.

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