16. WTO: Evolution and Contemporary Issues

Free Economy rapid revision notes for UPSC, APPSC and TGPSC. Original notes are presented below with their tables, images and visual aids preserved.

↓ Download original Economy PDF← All Economy topics

Select, copy, search and share the notes directly on this page.

16. WTO: Evolution and Contemporary Issues

16.1 From GATT to WTO

After the Second World War, the Bretton Woods Conference (1944) created the IMF and the World Bank. A third body, the International Trade Organisation (ITO), was planned in the Havana Charter (1948) but was never set up because the US did not ratify it. In its place the General Agreement on Tariffs and Trade (GATT), signed in 1947 by 23 countries, took effect from 1 January 1948.

GATT trade rounds

Round	Years	Focus
Geneva, Annecy, Torquay	1947 to 1951	Tariff cuts on goods
Geneva and Dillon	1956 and 1960-61	Tariff cuts
Kennedy Round	1964-67	Tariff cuts and an Anti-Dumping Code
Tokyo Round	1973-79	Tariffs and non-tariff barriers such as subsidies and technical standards
Uruguay Round	1986-94	Launched at Punta del Este; concluded with the Marrakesh Agreement (April 1994); added services, intellectual property and agriculture, and created the WTO

Remember

The WTO came into existence on 1 January 1995, with its headquarters in Geneva.
India is a founding member of both GATT and the WTO.
The WTO has 166 members (after Comoros and Timor-Leste joined in 2024).
Ngozi Okonjo-Iweala, the first woman and first African to head the WTO, became Director-General on 1 March 2021 and was reappointed for a second term from 1 September 2025.

16.2 Structure and Functioning

Body	Role
Ministerial Conference	Highest decision-making body; meets at least once every two years
General Council	Runs the WTO between conferences; also meets as the Dispute Settlement Body and the Trade Policy Review Body
Councils	For Trade in Goods, Trade in Services and TRIPS
Secretariat	Led by the Director-General; does administrative and technical work, with no power to make decisions for members

Decisions are taken by consensus. Each member has one vote, but a vote is rarely used.
The Trade Policy Review Mechanism regularly reviews the trade policies of members.

Core principles

Principle	Meaning
Most Favoured Nation (MFN)	A trade benefit given to one member must be given to all members
National Treatment	Imported goods must be treated no less favourably than domestic goods once they enter the market
Tariff binding	Members commit to upper limits ("bound rates") on their tariffs
Transparency	Trade rules must be published and notified
Special and Differential Treatment (S&DT)	Extra flexibility and longer time for developing and least developed countries
Reciprocity	Members exchange comparable market access

Exceptions include general exceptions for public morals, health and the environment (Article XX of GATT), national security (Article XXI), regional trade agreements (Article XXIV), and safeguards, anti-dumping and countervailing measures.

16.3 Major WTO Agreements

Agreement	Key Point
GATT 1994	Trade in goods
GATS	Trade in services, through four modes: cross-border supply, consumption abroad, commercial presence and movement of persons
TRIPS	Minimum standards for intellectual property rights such as patents, copyright and geographical indications
TRIMs	Investment measures that affect trade, such as local content rules
Agreement on Agriculture (AoA)	Rules on market access, domestic support and export competition
SPS and TBT	Sanitary and phytosanitary measures (food safety, animal and plant health) and technical barriers to trade
Anti-Dumping, Subsidies (SCM) and Safeguards	Rules for trade remedies against unfair or sudden imports
Trade Facilitation Agreement (TFA)	Agreed at Bali (MC9, 2013); in force from 22 February 2017; simplifies customs procedures
Agreement on Fisheries Subsidies	Agreed at MC12 (June 2022); bans subsidies for illegal, unreported and unregulated (IUU) fishing; entered into force in September 2025

Agriculture: the "boxes"

Box	Meaning
Green box	Subsidies that do not distort trade (research, extension, food security stocks, income support not linked to production). Allowed without limit
Amber box	Trade-distorting support linked to prices or output. Capped by the de minimis limit: 5% of the value of production for developed countries and 10% for developing countries
Blue box	Support linked to production-limiting programmes
S&DT box	Input and investment subsidies to poor farmers in developing countries

16.4 Dispute Settlement

A member files a complaint, which leads to consultations (60 days), then a panel, and then an appeal to the Appellate Body.
Rulings are adopted by negative consensus (automatic unless every member votes against), which makes the system strong.
The Appellate Body has not functioned since 11 December 2019, because the United States blocked the appointment of new judges and its quorum of three was lost.
A member that loses at the panel stage can appeal "into the void", which stops the ruling from becoming binding.
MPIA (Multi-Party Interim Appeal Arbitration Arrangement, 2020) is a workaround used by the EU and some other members; India is not part of it.

16.5 Ministerial Conferences

MC	Venue and Year	Key Outcome
MC3	Seattle, 1999	Collapsed amid protests and developing country objections
MC4	Doha, 2001	Launched the Doha Development Agenda (DDA); TRIPS and public health declaration
MC5	Cancun, 2003	Talks broke down; the G20 developing countries group emerged on agriculture
MC6	Hong Kong, 2005	Agreed to end agricultural export subsidies by 2013
MC9	Bali, 2013	Trade Facilitation Agreement; interim peace clause on public stockholding
MC10	Nairobi, 2015	Ended agricultural export subsidies
MC12	Geneva, 2022	Fisheries Subsidies Agreement; TRIPS waiver limited to COVID-19 vaccines; e-commerce moratorium extended
MC13	Abu Dhabi, 2024	E-commerce moratorium extended to MC14; no permanent solution on public stockholding
MC14	Yaounde, Cameroon, 2026	Ended in March 2026 without consensus

MC14 (Yaounde, March 2026)

The conference ended without agreement, mainly over the e-commerce moratorium.
The moratorium on customs duties on electronic transmissions, in place since 1998, lapsed for the first time in 26 years. Countries may now impose such duties.
The TRIPS non-violation complaints safeguard also lapsed.
India had opposed a permanent moratorium, citing revenue loss, and blocked the Investment Facilitation for Development (IFD) plurilateral agreement.
Talks on WTO reform and fisheries subsidies were carried on, with the fisheries aim set for MC15.

16.6 India and the WTO: Contemporary Issues

Issue	India's Position
Public stockholding (PSH)	India buys foodgrain at MSP for the public distribution system. The WTO formula for measuring subsidy uses 1986-88 reference prices, which makes India's support look larger than it is. India wants a permanent solution and not only an interim peace clause
Special Safeguard Mechanism (SSM)	India and other developing countries want a way to raise tariffs temporarily if imports surge or prices fall, to protect small farmers
Plurilateral agreements	India opposes bringing plurilateral deals, such as IFD and the e-commerce Joint Statement Initiative, into the WTO without consensus, saying they weaken the multilateral, consensus-based system
E-commerce moratorium	India has opposed making it permanent, as it loses customs revenue on digital goods
Fisheries subsidies	India seeks protection and a long transition for small, traditional fishers
S&DT	India opposes attempts by developed members to reduce the special treatment of developing countries
TRIPS and public health	India supports flexibilities such as compulsory licensing, based on the Doha Declaration (2001)

Wider challenges

Unilateral tariffs and trade wars weaken the MFN principle and the idea of bound tariffs.
Dispute settlement is weakened without a working Appellate Body.
Subsidies and industrial policy by large economies make it hard to maintain a level playing field.
Climate and trade: measures such as the EU's Carbon Border Adjustment Mechanism raise questions about WTO rules and fairness to developing countries.
WTO reform: how to take decisions, how to treat developing members and how to restore dispute settlement.

Quick Recall

GATT: 1947 (23 countries; effective 1948); WTO: 1 January 1995, headquartered in Geneva.
Uruguay Round (1986-94) created the WTO; Doha Round launched in 2001.
MFN and national treatment are the core principles.
TFA: Bali 2013, in force 22 February 2017; Fisheries Subsidies Agreement: MC12 (2022), in force September 2025.
Amber box de minimis: 5% (developed) and 10% (developing).
Appellate Body inactive since 11 December 2019.
MC14 (Yaounde, 2026): no consensus; e-commerce moratorium lapsed.
India seeks a permanent solution on public stockholding and opposes IFD.

16. WTO: Evolution and Contemporary Issues