What is WTO and GATT in details

 

WTO

DATE

• January 5, 1995 - present

HEADQUARTERS

• Geneva

 

AREAS OF INVOLVEMENT

• International trade
• Globalization

 

World Trade Organization (WTO), international organization established to supervise and liberalize world trade. The WTO is the successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1947 in the expectation that it would soon be replaced by a specialized agency of the United Nations (UN) to be called the International Trade Organization (ITO). Although the ITO never materialized, the GATT proved remarkably successful in liberalizing world trade over the next five decades. By the late 1980s there were calls for a stronger multilateral organization to monitor trade and resolve trade disputes. Following the completion of the Uruguay Round (1986–94) of multilateral trade negotiations, the WTO began operations on January 1, 1995.

 

Objectives And Operation

The WTO has six key objectives:

(1) to set and enforce rules for international trade,

(2) to provide a forum for negotiating and monitoring further trade liberalization,

(3) to resolve trade disputes,

(4) to increase the transparency of decision-making processes,

(5) to cooperate with other major international economic institutions involved in global economic management, and

(6) to help developing countries benefit fully from the global trading system. Although shared by the GATT, in practice these goals have been pursued more comprehensively by the WTO.

For example, whereas the GATT focused almost exclusively on goods—though much of agriculture and textiles were excluded—the WTO encompasses all goods, services, and intellectual property, as well as some investment policies. In addition, the permanent WTO Secretariat, which replaced the interim GATT Secretariat, has strengthened and formalized mechanisms for reviewing trade policies and settling disputes. Because many more products are covered under the WTO than under the GATT and because the number of member countries and the extent of their participation has grown steadily—the combined share of international trade of WTO members now exceeds 90 percent of the global total—open access to markets has increased substantially.

The rules embodied in both the GATT and the WTO serve at least three purposes. First, they attempt to protect the interests of small and weak countries against discriminatory trade practices of large and powerful countries. The WTO’s most-favoured-nation and national-treatment articles stipulate that each WTO member must grant equal market access to all other members and that both domestic and foreign suppliers must be treated equally. Second, the rules require members to limit trade only through tariffs and to provide market access not less favourable than that specified in their schedules (i.e., the commitments that they agreed to when they were granted WTO membership or subsequently). Third, the rules are designed to help governments resist lobbying efforts by domestic interest groups seeking special favours. Although some exceptions to the rules have been made, their presence and replication in the core WTO agreements were intended to ensure that the worst excesses would be avoided. By thus bringing greater certainty and predictability to international markets, it was thought, the WTO would enhance economic welfare and reduce political tensions.

 

Resolution of trade disputes

·        The GATT provided an avenue for resolving trade disputes, a role that was strengthened substantially under the WTO. Members are committed not to take unilateral action against other members. Instead, they are expected to seek recourse through the WTO’s dispute-settlement system and to abide by its rules and findings.

 

·        The procedures for dispute resolution under the GATT have been automated and greatly streamlined, and the timetable has been tightened.

·        Dispute resolution begins with bilateral consultations through the mediation, or “good offices,” of the director-general. If this fails, an independent panel is created to hear the dispute.

 

·        The panel submits a private draft report to the parties for comment, after which it may revise the report before releasing it to the full WTO membership. Unlike the IMF and the World Bank, both of which use weighted voting, each WTO member has only one vote.

 

·        As in the earlier GATT system, however, most decisions are made by consensus. Unless one or both of the parties files a notice of appeal or the WTO members reject the report, it is automatically adopted and legally binding after 60 days.

 

·       The process is supposed to be completed within nine months, and, if an appeal is lodged, the WTO Appellate Body hears and rules on any claim of legal error within 60 days. Appellate rulings are automatically adopted unless a consensus exists among members against doing so.

 

Trade-policy reviews

·        The WTO also seeks to increase awareness of the extent and effects of trade-distorting policies, a goal that it accomplishes through annual notification requirements and through a policy-review mechanism.

·        Notices of all changes in members’ trade and trade-related policies must be published and made accessible to their trading partners. For many developing countries and countries whose economies were formerly centrally planned, this requirement was a major step toward more transparent governance.

 

·        The WTO reviews the trade policies of the world’s four largest traders (the European Union, the United States, Japan, and China) once every two years, the policies of the 16 next largest traders once every four years, and the policies of all other traders once every six or more years.

 

·        After extensive consultations with the member country under review, the WTO Secretariat publishes its review together with a companion report by the country’s government.

 

·        The process thus monitors the extent to which members are meeting their commitments and provides information on newly opened markets. It also provides a firmer basis for subsequent trade negotiations and the resolution of trade disputes.

 

GATT

The General Agreement on Tariffs and Trade (GATT) was a free trade agreement between 23 countries that eliminated tariffs and increased international trade.

 As the first worldwide multilateral free trade agreement, GATT governed a significant portion of international trade between January 1, 1948 and January 1, 1995. The agreement ended when it was replaced by the more robust World Trade Organization (WTO).

 

Key Takeaways

·        The General Agreement on Tariffs and Trade was a treaty created after World War II to help the economies of countries affected by the war.

·        This agreement would pave the way to the creation of the World Trade Organization.

·        With countries becoming increasingly integrated economically, war between member countries dropped.

·        GATT did have drawbacks when it came to the amount of autonomy some countries gave up, with global goals prioritized over local ones.

Purpose

The purpose of GATT was to eliminate harmful trade protectionism. That had sent global trade down 66% during the Great Depression.⁴ GATT restored economic health to the world after the devastation of the Depression and World War II.

Three Provisions

GATT had three main provisions. The most important requirement was that each member must confer most favoured nation status to every other member. All members must be treated equally when it comes to tariffs. It excluded the special tariffs among members of the British Commonwealth and customs unions. It permitted tariffs if their removal would cause serious injury to domestic producers.

Second, GATT prohibited restrictions on the number of imports and exports. The exceptions were:

• When a government had a surplus of agricultural products
• If a country needed to protect its balance of payments because its foreign exchange reserves were low
• Emerging market countries that needed to protect fledgling industries

In addition, countries could restrict trade for reasons of national security. These included protecting patents, copyrights, and public morals.

The third provision was added in 1965, addressing developing countries joining the GATT. Developed countries agreed to eliminate tariffs on imports from developing countries to boost those economies. Lower tariffs had benefits for developed countries, as well. As the GATT increased middle-class consumers throughout the world, there was an increased demand for trade with developed countries.

GATT and WTO

GATT lives on as the foundation of the WTO. The 1947 agreement itself is defunct.  But its provisions were incorporated into the GATT 1994 agreement. That was designed to keep the trade agreements going while the WTO was being set up. So, the GATT 1994 is itself a component of the WTO Agreement.

Member Countries

The original 23 GATT members were Australia; Belgium; Brazil; Burma, (now called Myanmar); Canada; Ceylon, now Sri Lanka; Chile; China; Cuba; Czechoslovakia, now Czech Republic and Slovakia; France; India; Lebanon; Luxembourg; Netherlands; New Zealand; Norway; Pakistan; Southern Rhodesia, now Zimbabwe; Syria; South Africa; the United Kingdom and the United States. The membership increased to more than 128 countries by 1994.

Pros and Cons

Pros

·        GATT encouraged international trade.

·        Countries with trading agreements are less likely to go to war with one another.

·        The success of GATT inspired other international deals and organizations.

·        Trade increases communication.

Cons

·        Domestic industries that can't compete globally will likely fail.

·        The globalization of industries exposes more of the world to risks within that industry.

·        Trade agreements could overrule domestic law, forcing governments to cede some level of control over their citizens.

·        Small economies and businesses may struggle to compete with large economies and businesses.

What is e-commerce?
Electronic commerce or ecommerce is a term for any type of business, or commercial transaction that involves the transfer of information across the Internet. It covers a range of different types of businesses, from consumer-based retail sites, through auction or music sites, to business exchanges trading goods and services between corporations. It is currently one of the most important aspects of the Internet to emerge. E-Commerce allows consumers to electronically exchange goods and services with no barriers of time or distance. Electronic commerce has expanded rapidly over the past five years and is predicted to continue at this rate, or even accelerate. In the near future the boundaries between "conventional" and "electronic" commerce will become increasingly blurred as more and more businesses move sections of their operations onto the Internet.

Basically there is three types of E-Commerce are existing. They are: -
1) B2B (business to business)
2) B2C (business to consumer)
3) C2C (consumer to consumer)

Whether e-commerce has insured the rights of consumers
Technology is facilitating the creation of new approaches to service delivery and permitting the introduction of new electronic products. For example, a number of major Canadian financial institutions are now offering financial products and services through the Internet. In many cases, their competitors are scrambling to catch up. Some financial institutions view the Internet as an alternative product delivery channel. For others, including the new Citizens Bank of Canada, a subsidiary of Vancouver Savings Credit Union and ING Direct, the trust company subsidiary of ING Bank (Netherlands), the Internet is a primary delivery channel. No proprietary software or private communication network is necessary. Customers can use industry standard Web browser software and must arrange their own access to the Internet through an Internet service provider.

The conduct of financial transactions through the Internet is not likely to displace other more traditional channels anytime soon. However, financial institutions appear to be drawn by two factors. The first is the lower transaction costs associated with transactions conducted electronically as opposed to their branch networks. The second attraction is the demographics of customers who are interested in using the Internet to access financial services. One American study projected that with respect to the banking industry, each Internet customer is likely to be 50-250% more profitable than the average banking customer. Some financial institutions have also begun experimenting with the use of electronic contracts formed through "click-through" or "Web-wrap" agreements. For instance, First Union, a US bank, offers an on-line application for a home equity loan. Part of the application procedure includes a notification of certain terms and conditions. To complete the process, applicants must click on a button marked "I understand and accept the above terms and conditions". A similar procedure is used by Bank of Montreal to process on-line applications for MasterCard products.

The use of such on-line contracts requires consideration of the extent to which such conduct by an applicant can legally constitute "acceptance" and of various writing and signature requirements applicable to certain types of transactions.

Consumer Issues: -

·        Major consumer issues raised by Internet transaction systems include:
Ø Security
Ø Privacy
Ø Terms and Conditions
Ø Access
Ø Dispute Resolution
Ø Fees and Charges
Ø Fraud
Ø Jurisdiction issue is most important issue in E-commerce.

 

Liabilities of the e-commerce entity

• Informed Choice: An e-commerce entity shall have an obligation to display all the terms relating to refund, exchange, warranty/guarantee, delivery and shipment etc. and such other information as may be required to enable a customer to make informed decisions. Further, all safety and health care information of the goods and services are always required to be duly advertised for sale.
• No deception: An e-commerce entity shall ensure the images or information as displayed in the advertisement are always consistent with the actual goods or services and its features.
• Payment Security: An e-commerce entity shall ensure that adequate information is provided regarding the methods of payment available and the security of the same, information regarding cancellations, refund, charge back options and any additional costs if applicable shall also be made available on the website.

• Personal Data: An e-commerce entity shall have the duty to safeguard and protect all personal data of the customers and shall ensure compliance of the Information Technology (Amendment) Act, 2008.
• Return of Product: An e-commerce entity shall not deny any return of goods if the return is being made due to delay in delivery, delivery of defective or spurious or wrong products and or deception from the product received with the advertisement. Further, all payments towards any accepted requests for refund shall be made no later than 14 days from the date of acceptance of such a refund request.
• Counterfeit Product: An e-commerce entity, upon receiving information either directly or indirectly, about any counterfeit product being sold on its platform, shall satisfy itself of the legitimacy of the information. Post due diligence, the e-commerce entity shall notify the seller and in the absence of any evidence of the genuineness of the product by the seller, it shall delist the product from its platform and notify its customers accordingly.
• Contributory Liability: E-commerce shall have the liability of all the products being sold on its platform that it assures or guarantees to be authentic and shall be guilty of contributory or secondary liability if such assurance or guarantee is found untrue or false.

Liabilities of Sellers

Any seller selling or advertising its product or services on an e-commerce platform shall have the following liabilities:

• To have a written contract with the e-commerce entity prior to such sale or advertisement.
• To provide all information regarding the contract with the e-commerce entity as required either by law or by any other similar regime;
• To provide both single figure total and also a break-up price for the goods or services being sold. Such a display of charges shall include an express display of all compulsory charges such as delivery, postage, taxes and handling and conveyance charge.
• To ensure compliance with Legal Metrology (amendment) Rules 2017 for pre-packaged commodities;
• To ensure that each consumer shall be mandatorily provided with the safety and health care warnings of the goods or services and also the shelf life of any product being provided at any physical point of sale. Further, the seller shall also be mandatorily required to provide the shipping and delivery policies for the customers.
• The seller shall at all times be responsible for all and any warranty/guarantee obligations with regard to the products/services being sold.
• The Seller shall ensure that there is clarity between itself and e-commerce entity, on the process of exchange, returns and refunds of goods and the cost incurred therein.

Consumer grievance redress procedure

1.     The Guidelines mandates that every e-commerce entity shall mandatorily publish on its website the name and contact details of the Grievance Officer.

2.     Further a clear mechanism is required to be stipulated on the website regarding the complaints and their redressal.

3.     The Guidelines mandates redressal of the complaint within one month from the date of receipt of such complaint by the Grievance Officer.

4.     An e-commerce entity shall ensure that the consumers are provided with the facility to get their complaints by various methods such as vide email, over the phone or on the website.

5.     Each complaint shall have a unique complaint number and the same shall be provided to the respective customer for the purpose of tracking the status of their complaint.

6.     Guidelines state that the consumers shall be provided with transparent and effective consumer protection that is not less than the level of protection offered in other forms of commerce.

7.     Such a statement is vague and subject to varied interpretations by various entities, thereby increasing the probability of its misuse.

8.     Further, each e-commerce entity is required to provide a mechanism or system wherein any grievance redress mechanism shall be permitted to be converged with National Consumer Helpline.

Conclusion

The Guidelines seem to be in clear compliance with Rule 11 of Information Technology (Intermediaries Guidelines) Rules, 2011 ("Intermediary Guidelines"). While the Intermediary Guidelines fail to provide a time limit for redressal of a complaint and tracking of the status of each complaint, the Guidelines have taken a step ahead to ease the process for the consumers. These Guidelines once approved is likely to become part of rules to the Consumer Protection Act, 2019, thereby having better enforceability in the court of law.

While there already existed various similar governing laws for brick and mortar stores, new guidelines repeating the same could have been avoided by making adequate changes to the already existing law. However, it would be interesting to see how soon the Guidelines sees the light of the day and interpretation of the same by varied e-commerce entities.

 

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