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Monday, September 10, 2007

World Trade Organisation - WTO in full

Anything u think of WTO is here & that too in a very legible n interesting way,

Thanks to the Anonymous author, presenting B4U.....
"Resolved That all friends of CS-Final are clearing WTO, JV & FC, this time.......

World Trade Organization

I) World trade organization:

1) is an institution.

2) comprised of:

** GATT 1994 - General Agreement on Tariffs and Trade

(1947 agreement + latest decisions-in respect of controversies + amendments made). It began with 3 sections in the year 1945. The 4 th section was introduced in 1964 covering 38 artilces.

** GATS - General Agreement on Trade in Services

** TRIPS - Trade Related Intellectual Property Rights

** TRIMS Trade Related Investment Measures

** DSM - Dispute Settlement Mechanism.

(Note: it is the presence of DSM in WTO's regime that differentiates it from GATT 1947).

II) Important Rounds from the examination point of view:

a) Uruguay Round.

b) Paris convention. (I guess there is another one that is to be read with this one…if I am not wrong that is Berne OR Bonn..i don't remember exactly.)

c) Marakkesh Treaty.

d) Doha Declaration.

e) Hongkong….(though this round is not that much important, but since this happens to be the latest on cards, and having been held somewhere in December, it might very well come for the exam).

Rest if time permits, or if u feel that u r bugged up, u can go thru them during that time.

III) Important agreements:

a) Agreement on agriculture.

b) Agreement on Textile and clothing.

c) Agreement on Anti-dumping.

d) Agreement on CVD.

e) Agreement on Safeguards.

IV) General Agreement on Tariffs and Trade:

Part I of GATT:

Three pillars of GATT:

Most Favoured Nation.

Binding Tariff Commitment. And

Uniform National Treatment.

1) Article I and II:

i) MFN: Most Favoured Nation.

Meaning: All the members of the WTO are to be treated at par. There should be no discrimination amongst the members of WTO.


Article II of GATT:

Deals with Schedule of Concessions:

à Tariffs and concessions.

2) Uniform National Treatment: Artilce 5

Once the goods of a country enter into the commerce of another country, it shall be treated at par with the indigenously produced goods.

For eg.:

Indian goods àentering àAmerican Market à shall be treated at par à with the goods produced in America.

Under Article 21, one can break the rules of GATT (i.e. MFN, UNT etc.) on security grounds.

Article 6 says that no country will allow dumping or subsidized goods to enter into its commerce if it is injurious to domestic industry.

Article 7 deals with customs valuation of goods.

Article 8 deals with Fees and Formalities connected with Importation and exportation. (Note: India charges 1% of C.I.F Value).

Article 10 - Complete trade related rules are to be declared at appropriate time to WTO.


6 19 16 11

Dumping Safeguards Subsidies Quantitative Restrictions

Article 11: Quantitative Restrictions:

No country can have quantitative restrictions on goods being sold to that country barring the goods covered under the negative list.

(INDIA: 1998- 7000 items were there under article 11.

Latest status: 1429 were under quantitative restrictions list. 715 items were lifted on 01.04.2000, and balance on 01.04.2001 i.e. 714 items.)

Quantitative restrictions should be on Non-discriminatory basis. (i.e. applicability of the rule of MFN)

Exception: Article 13 – Balance of Payments.

Article 12: Restrictions to provide for action to be taken by government to check BOP payments.

Article 18 (A): BOP – correction…to be read with Article 12.

Article 18 (B): Foreign Exchange to be maintained – Exception to Article 12.

Article 18 (C): Protection of Domestic Industries:

Article 20: General Or Security Restrictions

Part III of GATT

Article 24: Free Trade Arrangement OR customs union OR Economic Unions.

Article 24 is an exception to Article 1 (MFN). There are around 300 items coming under FTA.

First worthwhile FTA was entered with Thailand, called as "EARLY HARVEST SCHEME" covering 85-86 items. (from 01.09.2004). {just for information}.

June 2005: CECWS: comprehensive economic cooperative agreement with Singapore.

(may come for examination).

Part IV of GATT

Special and differential treatment of developing countries.

Generalized System of Preferences whereby developing countries were given concessions in respect of payment of duty.

Agreement on Anti dumping:

** It has 18 articles and 2 annexures.

** It is not applicable to services. It is applicable only for products. It is also not applicable in case of smuggled goods.

Meaning of dumping:

A product is considered to be dumped when such product enters the commerce of the country at less than its normal price.

What is meant by Normal Price?

a)*1 Normal value – comparable value

b)*1 (of) Like Product

c)*1 (sold) During the course of trade

d)*1 In domestic country.

How normal value is to determined?

There are three methods in which normal value can be determined:



*1 Sales to appropriate Construct Costs using data

(a) to (d) is Third country allowing Sales and General

less than Expenses & administration

comparable prices. Expenses plus profits.

(this is the commonly used

(comparison is to be made method to determine normal

only when at least 5% of the value)

export quantity is sold in

the domestic market)

20-80 test: this test is usually applied in determining normal value under Step I. It means that at least 80% of transactions should have resulted in profits. It is only upon this condition that the determination of normal value under Step I is permitted.

Article 2.3:- Relationship/composite arrangement

Value to next independent buyer

Prices are usually compared at ex-factory level.

Elimination of interest, physical characteristics, are all on equal footing for determining ex-factory price.

Article 6:- Determination of Injury:

15 parameters have been laid down in article 3.4 for the purpose:

Actual and potential decline in

1) Sales

2) Profit.

3) Output.

4) Market share.

5) Productivity.

6) Return on Investments.

7) Utilization of capital.

8) Inventories.

9) Employment.

10) Wages.

11) Growth.

12) Ability to raise capital/investment.

13) Factors affecting domestic prices.

14) Magnitude/margin of dumping.

15) Negative effects on cash flows.

What is meant by injury?

Injury is a depression on the working of domestic industries.

(align reasons extraneous to dumping to determine injury).

Important point:


Causal Material Injury


All the three must exist together to prove dumping.

De-Minimus Margin:

Price: The volume of dumped import shall normally be regarded as de-minimus i.e. negligible, if the price at which the goods are being dumped is less than 2% of export price.

Quantity: The volume of the dumped import shall be regarded as de-minimus i.e. negligible, if the volume at which the goods are being dumped is less than 3% of Total Imports of the like product by the importing member.

In other words, if dumping of goods, in terms of price/quantity being imported exceeds the above prescribed minimum, then the country can proceed to impose dumping duty on the goods being so imported.

Group of countries involved:

When a group of countries dump the products at less than the margin fixed, then they shall be aggregated to determine the level of dumping, and the Anti dumping duty shall be levied thereafter.

Price: 4% ( I guess it is 4%, plz kindly refer the book)

Quantity: 7%.

Procedure for determining the dumping duty: Shall be based on investigation:

Filing of application

(by the domestic industries)

Initiation of investigation

Time taken – usually 60 days

Preliminary determination Negative


Of investigation


Impose Preliminary Impose price undertakings


Final determination

Positive Negative

New Comer Interim review

Review also called as changed circumstances


Levy dumping Termination of Investigation

Measures for 5 years

Sunset review

Continue for another five years

Positive Negative termination of Invg.


1) While initiating investigation, it shall specify the period with respect to which investigation is to be made.

2) Sunset review means existence of circumstances forcing continuation of levy of dumping measures.

3) New comer review: it can very well be explained with the help of an example:

let us assume that the Tata and Birla have been dumping their goods in Japan. Now, Ambani wants to enter the market say after 2 years of preliminary measures…hence, the Ambani may request Japan to make a new comer review and identify the need for imposition of dumping duty.

4) Interim review also known as changed circumstances review:

Interim review is requested by the importing industry to the government of the country, to review the circumstances based on which dumping duty was imposed. In other words, it is a request to reconsider the imposition of dumping duty.

Article 5.2: Domestic industries to submit evidence in respect of the 15 parameters under article 3.4.

Article 5: Initiation standards.

Zeroing of dumping:

Let us take the example of India dumping goods in Japan. In order to determine dumping based on export prices, it is necessary for the japan to consider all the prices at which the goods have been imported.

In other words, it is necessary for japan to consider both the prices below the normal value and the prices above the normal value.

For example: Prices at which goods have been imported Normal value

1000 1500







Hence, the price of Rs. 1600 is also to be considered for the purpose of determining dumping margin.

How is dumping margin determined?

Dumping Margin = Normal value – export price

Injury margin =

Price sold by domestic industries Rs.140.00

Less: Price sold Rs.060.00

Duty Rs.020.00

Transportation Costs Rs.020.00


Injury margin Rs.040.00

Normal Value, when disregarded:

a) No domestic sales.

b) Ordinary course of business, at 5% of export quantity sold (i.e. if it is less than 5%).

c) Sales made at a loss (20-80test-profits).

d) Comparison at ex-factory level (not possible)

Agreement on Safeguards:

Assessment of material injury:

Imminent threat and foreseeing of injury. Shall be based only on facts and not on any allegations or conjuncture.

Article 3.7 provides for 4 factors for determining threat of material injury;

a) Rate of increase of dumped imports.

b) Capacity of the party which is dumping.

c) Price suppressing/depressing effects àextent of dumping.

d) Inventories.

Article 11: provides for three types of review:

Interim review, sunset review, and new comer review.


Causal Serious Injury


Something on Agriculture:


What are the important factors to be looked into:

a) Specificity:

It means that the subsidy offered must be industry/enterprise specific.

b) Export Oriented:

The subsidy given should be export oriented, than merely providing relief to the farmers.

c) Export Promotion Capital Goods Scheme

It is only on the fulfillment of the above factors/conditions, can a country consider that the subsidy offered by the government of another country is indeed injurious to the commerce of this country and proceed to impose the duties on such imports.

Examples of subsidies:

Bounty, grants, benefits, subsidy (as such), and non-taxability of taxable proposition.

Interest free sales tax is not a subsidy.

Countervailing measures can be imposed only if:

a) Subsidised goods are being imported,

b) There is Material injury,

c) There is causal link.

The difference between the Countervailing measures, Anti dumping duty, and safeguard measures is that in safeguards the injury factor is a serious injury and not material injury as in other cases.

Filing of application

Initiation of investigation

Public notice of hearing

Preliminary investigation findings

Positive Negative

Impose Accept undertakings

Preliminary a) Termination of undertakings. Terminate investigation

Measures b) termination of CVD

Final determination

Positive Negative Termination of Invg

Suo Motu/Application

Of interested party

Mid-term review

(to be completed within 12 months)

Levy Countervailing duty for

5 years

Sunset review after 5 years

Judicial review:- independent tribunal formed by members to review the consistency of determination of the investigation authority.

Agriculture subsidies:

Topics that can be referred are: Definition of measures (Article 9.1), anti-circumvention, difference between safeguards under agriculture, and subsidies and countervailing measures, phased introduction/decrease in existing subsidies, peace clause (A.13), and Article 20..continuation of negotiation.


There are four modes of services:





Services cross borders

Telephone services


Service receiver cross borders

Patients coming for treatment in Indian hospitals.


Commercial presence of establishment

Mostly influenced by developed countries

establishing branch offices….


Service provider cross borders

Mostly associated with the interest of developing countries.

Indians going abroad like software professionals.

12 major sectors

11 listed sectors other sectors

165 sub-sectors

Every product in WTO is described by an 8 digit code:

There are 95 chapters, divided as follows:

1) First 17:- agricultural products

2) Balance 78:- industrial products.

In all they cover roughly 12000 products.

Rules of origin/Letter of origin:

a) LOO is Issued by chamber of commerce and industry (usually).

b) Purpose for obtaining ROO/LOO:

i) efficient operation of Regional Trade agreements.

ii) dumping determination.

iii) Generalised system of preferences:- i.e.

*** export by least developed countries to developed countries at lower rates of tariffs as compared to developing countries.

*** No MFN rate.

*** Concessional rate of tariffs.


*Let us assume as follows:

**Cotton is produced in Turkey.

***Yarn is made in Egypt.

****Dyed and cloth made in India.

*****Ready made garments in China.

Now, if the cotton produced in Turkey is covered under chapter 46, and cloth manufactured in India is covered under Chapter 54, then it shall be deemed that the product originated in India (since the final product being sold is Cloth).

Now, let us take another situation. If the cotton produced in Turkey is covered under Chapter 46, and the cloth manufactured in India is also covered under Chapter 46, then it shall be deemed that the product originated in Turkey.

Read it again!

Trezrrr every pulsss


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