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1. Concept of International Trade From the ancient Greek philosophers who gave due recognition to the benefits of international exchange as well as to looking into the interests of the domestic industries to the mercantilists of the 17th and 18th century Europe who advocated the promotion of a favourable balance of trade to Adam Smith who propounded the principle of free trade in his book ‘An Inquiry into the Nature and Causes of the Wealth of Nations’ published in 1776 – everybody had reflected upon the benefits of international trade. Later on, in the 19th century, the theory of comparative advantage, which was propounded by David Ricardo, supported by James Mill and Robert Torrens, gave a further fillip to international trade. Smith fundamentally changed the economic thinking of international trade when he espoused the principle of free international trade, which rested on two-twin pillars- specialization and the division of labour. The key factor for the division of labour is the size of the market. Large markets can support division of labour but smaller markets cannot do so. On the other hand, specialization will lead the way towards increased productivity that is producing more volume of goods from the same quantity of resources. This necessary entails that international trade fuelled by specialization, will create large international markets which will permit international division of labour, whereby all countries will be able to increase their productivity and their standard of living. Even a less developed country, lacking an absolute advantage in the production of any goods, can still enjoy the fruits of mutually beneficial international trade with a more developed country, whose domestic industries can benefit from intense import competition. In the process, a country becomes competitive in certain areas of production of goods. This germination of the idea of free international trade, along with related concepts like the dispensation of export subsidies and import restrictions and the promotion of efficiency through competition, was due to Adam Smith and these economic ideas pilfered down through to the WTO principles and agreements. 2. Institutionalisation of International Trade Through the ages, unequal economic development of countries has been a major challenge to mankind. Even as recently as in 1944, in the aftermath of the two destructive World Wars, the so-called developed economies like USA and UK were reeling under the impact of intractable depression on the domestic front and lack of trade on the external front. To tackle this problem, the Bretton Woods Conference in 1944 did the pioneering work by laying down the basis of the formation of three prominent international organizations, namely the International Monetary Fund (IMF), the International Bank for Reconstruction and Development (later renamed as the World Bank) and the International Trade Organisation (ITO). Pursuing the agenda of the Bretton Woods Conference to promote economic liberalization and restore trading relations, prolonged negotiations among nation states took place, ultimately culminating in the signing of the General Agreement on Tariffs and Trade (GATT) by 23 countries in 1947 at Geneva. The GATT gave way to the World Trade Organisation (WTO), which was formed on January 1, 1995. The WTO took over all the agreements and arrangements concluded under the auspices of the GATT. The WTO, formed on the basis of the Dunkel Draft, is now the sole organisation for conducting multilateral trade negotiations and implementing all trade and trade related agreements. 3. From GATT to WTO: A Long and Difficult Route The predecessor to the WTO was the GATT. In the aftermath of the Second World War, which left a trail of destruction in its wake, the GATT was formed to boost trade liberalization and to correct protectionist measures, which remained in place. The GATT, which was a provisional agreement, was destined to last for nearly half a century, infact for 47 years (1948-1994). Though it is an incontestable fact that within it’s provisional nature and limited field of action, the GATT succeeded in liberating and promoting much of the world trade, the developed countries tried to exert their own dominance and pursue their own agenda, much to the detriment of the less developed countries. A prominent example to the point is the failure of the Havana Charter. The Havana Charter was designed to be the stepping-stone to the formation of the ITO. At the UN conference on Trade and Employment at Havana in March, 1948, the Havana Charter was agreed to. But, it’s ratification proved to be impossible when the United States government announced in 1950 that it would not seek Congressional ratification of the Havana Charter. Thus, the ITO, which was intended to be a specialized agency of the United Nations (UN) that would provide world trade disciplines and contain rules relating to employment, commodity agreements, restrictive business practices, international investment and services, proved to be a nonstarter due to the rigid stance of a developed nation like the USA. The failure to establish the ITO gives an indication of the measure of political and economic influence exerted on the international trading system as a dominant trading country by the USA (Sodersten and Reed, 1994). Under the auspices of GATT, the biggest achievements were the multilateral trade negotiations or the trade rounds that took place. The Tokyo Round conducted between 1973 and 1979 with 102 countries was conducted to progressively reduce tariffs. Even though a series of agreements on non-tariff barriers did emerge from the negotiations, it failed to address the fundamental problems affecting farm trade and it also stopped short in providing a new agreement on safeguards. The Uruguay Round was the most grueling and extensive. From Punta del Este in Uruguay in September, 1986 to Marrakesh in Morocco in April, 1994, it took almost seven and a half years to complete the Round. All the GATT articles were reviewed. It was the biggest negotiating mandate on trade ever agreed. The then GATT director general, Mr. Arthur Dunkel compiled the draft “Final Act” at Brussels in Germany in December, 1990. The draft became the basis of the final agreement. As several deadlines came and went, newer points of major conflict emerged- agriculture, services, anti-dumping duties, market access and the proposed creation of a new institution. Major differences between the USA and EU cropped up. In November 1992 the EU and the USA settled most of their differences in a deal, informally known as the “Blair House Accord”. By July 1993, the ‘Quad’ comprising of USA, EU, Japan and Canada made significant progress in negotiations on tariff and trade. On 15th of April 1994, the ministers of most of the participating countries signed the Final Act and this was known as the new GATT or GATT 1994, which replaced the old GATT or GATT 1947. The Final Act containing all the provisions of GATT 1994 contained 15 specific areas specified in Part I and Part II of the Act. Part I contains 14 areas of negotiation on trade in goods and Part II contains negotiation on trade in services (Datt and Sundharam, 2001). These Agreements were offered as a single treaty, as a single package. No element of the treaty could be considered as accepted unless the entire package was accepted in full (Banerjee, 1994). Thus it can be said that the ‘Marrrakesh Declaration’ envisaged a single institutional framework for conducting trade negotiations and affirmed that the results of the Uruguay Round would ‘strengthen the world economy and lead to more trade, investment, employment and income growth throughout the world’ (WTO Annual Report, 1998). In pursuant of the GATT 1994, the WTO came into force on 1st January, 1995 as single institutional framework for conducting multilateral trade negotiations, finalizing trade agreements, overseeing their implementation and resolving trade disputes. The principles of WTO embodies- (i) the GATT 1994, (ii) all agreements and arrangements under the GATT and (iii) the complete results of the Uruguay Round (MVIRDC World Trade Centre, 1994). In this way, the spirit of GATT loves on in the form of WTO, as all the agreements under GATT is an integral part of WTO, which continue to provide legal directions to trade (Aswathappa, 1996). 4. Contentious Issues The WTO Agreements cover goods, services and intellectual property. They include individual countries’ commitments to lower custom tariffs and other trade barriers and to keep open services market. They prescribe special treatment to developing countries. They set procedures for settling disputes. But apparently the procedures laid down for settling the disputes at the WTO is not enough. Otherwise, there would not be two unconcluded Ministerial Conferences, that is the 3rd Conference at Seattle in 1999 and the 5th Conference at Cancun in Mexico in 2003. The dramatic reversal of the Seattle Ministerial Conference witnessed protests from different sections of people across the globe. Also, the Ministerial Conference at Cancun set into motion raging debate on the primary issue of agricultural subsidy. In the face of worldwide protests from farmers from developing countries and least developed countries across the globe, triggered by the tragic death of a Korean farmer, Kun Hai Lee, who committed suicide to protest against the WTO Ministerial Conference at Cancun. The developed countries at Cancun wanted the developing countries to take steps to drastically cut down on the subsidies on agriculture, while the developed countries wanted to keep their farm subsidies more or less intact. This unfair demand made by the developed countries would lead to more deprivation of the developing countries as they would have to surrender their food security and agricultural self-sufficiency on the altar of the WTO to ensure more and more prosperity for the developed countries. This would go against the very objectives for which the WTO was formed. The imbroglio at the Seattle Conference and the Cancun Conference proved to be the litmus test for the developing countries as they came to present a united stand against the developed countries. In the 6th Ministerial Conference at Geneva in 2004 the developed countries gave a concession as a resolution was taken which would bind all countries to reduce farm subsidies on farm products and to reduce import duties on industrial and agricultural products. Infact the Seattle lessons seemed to have been learnt by the developed countries, as at the 4th Ministerial Conference at Doha in November, 2001 the developed countries were offering ‘best endeavor’, ‘good faith effort’ clauses in the Doha Ministerial Declaration. The developing countries were granted the flexibility of extended deadlines to implement their commitments. The implementation related issues remain a major source of friction between the developed countries and the developing countries. The developing countries have had a series of complaints about the manner in which the various WTO agreements were being implemented in practice. This was addressed to in the Doha Declaration. In the Uruguay Round, the bulkiest result was the individual countries’ commitments on specific categories of goods and services. In some cases the import custom tariffs are being cut to zero. Even the Agricultural Agreement, adopted in the Uruguay Round required member countries to cut their export subsidies over a period of six years. But, for developing countries, the six year period was extended to ten year period beginning from 1995. Besides being given extra time to complete their obligations, the developing countries do not have to cut their subsidies or lower their tariffs as much as developed countries. Several developing countries also have the option of offering ceiling tariff rates in cases where duties were not bound before Uruguay Round. Least Developed Countries (LDC) do not have to cut their tariff. Taking the averages of 1986-90 as the base level, developed countries have agreed to cut the values of their export subsidies by 36% over 6 years starting from 1995, but for developing countries the figure is 24% over 10-year period. Developed countries have also agreed to reduce the quantities of subsidized exports by 21% over 6 years, but the same is 14% for developing countries over 10 years. LDC do not have to make such cuts. During this implementation period, developing countries are allowed to use subsidies to lower the marketing and transportation costs under certain conditions. Another major issue relating to the WTO and developing countries is the Anti-Dumping agreement. The WTO promotes free trade. Dumping is characterised as an unfair trade practice. As it stands, antidumping laws are seriously flawed and lend themselves to political abuse. Anti dumping is a peculiar way of protecting nascent domestic industries in developing countries from the MNCs. So, price discrimination within national boundaries, when assessed in terms of distributive output and competitive effect on domestic economy, has ambiguous welfare implications. But, developed countries refuse to buy this argument and repeatedly investigate the same firms for dumping the same products repeatedly within a short span of time. Indian laws were amended from 1.1.1995 to bring them in line with antidumping provisions of the WTO. Another point of debate is the global Intellectual Property Rights (IPR) regime. According to the provisions of the Agreement establishing the WTO, there are three Councils under the supervision of the WTO-(i) Council for Trade in Goods, (ii) Council for Trade in Services and (iii) Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS). The TRIPS Agreement which came into force on 1st January, 1995 and heralded a new era in the protection and enforcement of intellectual property rights, thereby improving the World Intellectual Property Organisation (WIPO) objectives. India, a developing country had a transition period of 5 years, from 1-1-1995, till1-1-2-2000 to apply the provisions of the Agreement. An additional transition period of 5 more years was also available in extending product patent protection to technological areas where there was no protection. India being an active member of WIPO and UNESCO has ratified the Agreement and taken measures to implement it. The TRIPS Agreement with 73 articles is a comprehensive document, both for developed countries and developing countries (Reddy, 2003). The TRIPS Agreement is divided into seven parts and covers a wide range of aspects, types and modalities of IPRs. Thus, the range of the TRIPS Agreement is wider than those of the existing national laws of developing countries. A new variety of IPR is the prevention of anti-competition practices in contractual laws, which falls outside the purview of national intellectual laws of even developed countries. Many developing countries could not comply with the IPR regime within the stipulated time. In India, the process of amending intellectual property rights has generated heated debates on some of the amendments as they seem to impugn on the sovereign rights to formulate and manage her own legal system according to her best national interests (Bose, 2004).

Developed countries often try to bring in the issue of aid for assistance to trade as a bargaining chip to further their own interests, even though aid for assistance is not part of negotiations in any round (Harkness, 2006). Though Pascal Lamy, the director General of the WTO, hotly contested this. It would have been better if developing countries did not accept any assistance towards performing their existing international obligations. But, aid for trade is a necessity even as imbalances in the current rules of multilateral trading exists and many suspect that there is a realationship between Aid for Trade and demand for enhanced access to markets in developing countries. This further per vacates the invisible North-South divide.

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