Lesson-40 Agreements under WTO


The WTO agreements cover goods, services, intellectual property and more sensitive sectors agriculture, textile and clothing. Trade in agricultural commodities was included in the agreement for the first time. They spell out the principles of liberalization and the permitted exceptions. They include individual countries’ commitments to lower customs tariffs and other trade barriers and to open and keep open services markets. They set procedures for settling disputes. They prescribe special treatment for developing countries. These agreements are often called rules and the WTO is often described as “rules-based”, a system based on rules. But it’s important to remember that the rules are actually agreements that governments negotiated. In this lecture, different agreements under WTO are discussed briefly.


1. Trade Related Investment Measures (TRIMS)

2. Trade Related Aspects of Intellectual Property Rights (TRIPS)

3. General Agreement on Trade in Services (GATS)

4. Agreement on Trade in Textiles and Clothing

5. Plurilateral Trade Agreement (PTA)

6. Agreement on Dispute Settlement Body

7. Trade Policy Review Body (TPRB)

8. Anti-dumping, subsidies, safeguards

9. Agreement on Technical Barrier to Trade (TBT)

10. Sanitary and Phyto-Sanitary measures (SPS)

11. Agreement on Agriculture (AOA)

1. Trade Related Investment Measures (TRIMS)

This agreement seeks to bring about multilateral disciplines on investment practices that distort trade flows. According to this agreement all measures obstructing foreign investment and distorting trade should be removed within two years by developed countries, five years by developing countries and seven years by the least developed countries. The important features of the TRIMS are as follows:

1. All restrictions on foreign capital/investors/companies should be scraped

2. The foreign investor should be given the same rights in the matter of investment as a national investing.

3. Restrictions will not be place on any area of investment

4. There should not be any limitation on the extent of foreign investment

5. There should not be restrictions on the imports of raw materials and components

6. Foreign investor will not be obliged to use local products and materials

7. It is not mandatory on the part of foreign investor to export a part of the output

8. Elimination of restrictions on repatriation of dividend, interest and royalty.

2. Trade Related Aspects of Intellectual Property Rights (TRIPS)

Intellectual property is economically valuable information. Intellectual property right is the legally enforceable power to exclude others from using the information created, or to set the terms on which it can be used. TRIPS prescribes minimum standards of protection to different intellectual property rights. Members are free to have higher standards at the national level.

The TRIPS agreement encompasses seven areas of intellectual property rights viz., i. copyright, ii. Trademarks, iii. Trade secrets, iv. Industrial designs, v. geographical indications, vi. Patents which also includes microorganisms and plant varieties and vii. Layout designs of integrated circuits.  

3. General Agreement on Trade in Services (GATS)

This agreement is based on the desire to establish a multilateral frame work of principles and rules for trade in services with a view to expanding such a trade under conditions of transparency and progressive liberalization. The services refer to banking and insurance, transport, communication, mobility of labour etc.

Under GATS, Most Favoured Nations (MFN) principles will apply to all member countries i.e., if a service of any kind is open to one member country, it should be extended to all member countries in equal measure. The second requirement is transparency i.e., all agreements affecting trade in services shall be published. Further each country is required to make market access commitments on services.

4. Agreement on Trade in Textiles and Clothing

The developed countries imposed most comprehensive quota restrictions under the Multi Fibre Agreement (MFA). This agreement on trade in textiles and clothing proposes to phase out quotas over ten year period beginning with 1 January 1995 and ending with 1 January 2005.

5. Plurilateral Trade Agreement (PTA)

These agreements are: agreement on trade in civil aircraft, agreement on Government procurement, international dairy agreement and international bovine meat agreement.

6. Agreement on Dispute Settlement Body

The dispute settlement process consists of consultations between the parties, failing which conciliation and mediation by the director general if agreed by the parties or a panel of three experts. It also provides for an appellate review by a standing appellate body, consisting of seven members set up by DSB to report to it within 90 days. The decision of the DSB will be binding on both the parties.

7. Trade Policy Review Body (TPRB)

This has been set up to carryout trade policy reviews. Frequency of such reviews depends on the share of a member in world trade.

8. Anti-dumping, subsidies, safeguards

Dumping is selling goods in a foreign country at a price which local producers regard as unfairly low. It means selling of goods at less than the long-run average cost of production plus transport cost, i.e., charging a lower price in export market than is charged for comparable goods in home markets; or simply selling at a price with which producers in the importing country cannot compete. Dumping is considered as unfair trade practice which can have distortive effect on international trade.

Anti-dumping is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect. Anti-dumping duties are tariffs imposed in response to alleged dumping. The purpose of anti-dumping duty is thus to rectify the trade distortive effect of dumping. Anti-dumping duty is an instrument for ensuring fair trade and is not a measure of protection per se for the domestic industry. It provides relief to the domestic industry against the injury caused by dumping.

9. Agreement on Technical Barrier to Trade (TBT)

  • Technical regulations and standards set out specific characteristics of a product-such as its size, shape, design, functions and performance, or the way it is labeled or packaged before it is put on sale

  • In certain cases, the way a product is produced can affect these characteristics, and it may then prove more appropriate to draft technical regulations and standards in terms of a product’s process and production methods rather than its characteristics per se.

  • The TBT Agreement makes allowances for both approaches in the way it defines technical regulations and standards.

10. Sanitary and Phyto sanitary Measures Agreement (SPS)

Article 20 of the General Agreement on Tariffs and Trade (GATT) allows governments to act on trade in order to protect human, animal or plant life or health, provided they do not discriminate or use this as disguised protectionism. In addition, there are two specific WTO agreements dealing with food safety and animal and plant health and safety and with product standards in general. Both try to identify how to meet the need to apply standards and at the same time avoid protectionism in disguise. These issues are becoming more important as tariff barriers fall — some compare this to seabed rocks appearing when the tide goes down. In both cases, if a country applies international standards, it is less likely to be challenged legally in the WTO than if it sets its own standards.

Problem: How do you ensure that your country’s consumers are being supplied with food that is safe to eat — “safe” by the standards you consider appropriate? And at the same time, how can you ensure that strict health and safety regulations are not being used as an excuse for protecting domestic producers?

An agreement on how governments can apply food safety and animal and plant health measures (sanitary and phytosanitary or SPS measures) sets out the basic rules in the WTO. A separate agreement on food safety and animal and plant health standards (the Sanitary and Phytosanitary Measures Agreement or SPS) sets out the basic rules.


  • SPS measures to be based on scientific risk assessment

  • Countries should base their SPS measures on international standards

  • Countries may have higher level of SPS measures but shall be based on scientific risk assessment

  • Transparency: All proposed, new and  changed measures are to be notified by members to the SPS Committee of WTO Secretariat


  • Lack of adequate time to adapt to SPS measures and adequate advance warning about the new measures

  • High cost of adoption

  • Unwillingness on the part of the developed countries to accept equivalent measures of developing countries

  • Lack of adequate technical assistance to developing countries particularly for creating infrastructure necessary for ensuring quality testing standards

  • Ineffective participation in the activities of the international standardizing bodies leading to standards getting fixed by default

40.5  Strategy Recommended for Future

  • Upgradation of standard within India

  • Building-up scientific evidence to counter unreasonable SPS measures

  • Exporters should examine WTO-compatibility of health and sanitary regulations/product standards

  • Close-co-ordination between Government and Exporters regarding specific cases

  • Need for framing of standards for manufacture, production units/processes, monitoring contaminants, sampling procedures and additives.

40.6 Agreement on Agriculture (AOA)

The Agreement on Agriculture (AOA) forms a part of the final act of the Uruguay round of multilateral trade negotiations. The Uruguay round marked a significant turning point in world trade in agriculture, for the first time, agriculture featured in a major way in the GATT round of multilateral trade negotiations. The Uruguay round agreement sought to bring order and fair competition to this highly distorted sector of world trade by establishment of fair and market oriented agricultural trading sector.

The main cause of distortion of international trade in agriculture has been the massive domestic subsidies. (A subsidy is deemed to exist if there is a financial contribution by a Government on any public body and a benefit is conferred) given by the industrialized countries to their agricultural sector over many years. This in turn led to excessive production and its dumping in international markets as well as import restrictions to keep out foreign farm products from their domestic market. Hence, the starting point for the establishment of a fair agricultural trade regime should be the reduction of domestic subsidies given by the developed countries, reduction in the volume of subsidized exports and minimum market access opportunities for agricultural producers worldwide. AOA has three main components;

  • Market Access

  • Domestic subsidy or domestic support and

  • Export subsidies

These three components are discussed in detail in next chapters.

Last modified: Thursday, 10 October 2013, 5:03 AM