WTO`S Seventh Trade Policy

The World Trade Organization (WTO) is an international organization formed in 1995, a lineage of the General Agreement of Traffics and Trade (GATT) founded in 1948. WTO was formed to regulate international trade policy. In this international forum, members negotiate trade issues, formulating WTO agreements. There is a dispute settlement mechanism (DSM) to readdress trade disputes among members. The governing body of WTO consists of its members; the present members are one hundred sixty-four. Most of the associates are sovereign countries, with a few exceptions like Hong Kong, as it always enjoyed a separate customs regime. The European Union (EU), with its twenty-seven individual members, is an associate of WTO.

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WTO agreements are a sequence of connected accords dealing with different aspects of trade policy. The framework of WTO agreements is an amended version of the General Agreement of Traffics and Trade (GATT) from 1948. The main purpose is to facilitate tariffs and other issues related to international trade. Along with GATT, the General Agreement on Trade in Service (GATS) defines the trade obligations of WTO associates. In the Uruguay Round of trade talks (1986-94), other sectoral accords like Agreement on Agriculture were signed. However, this conference was followed by Doha round, where no comprehensive agreement emerged. 

What is Trade Policy?

Trade policy defines guidelines, goals, rules, and regulations regarding trade relations between countries. Each country has its own trade policy formulated by the designated office. The purpose of this policy is to enhance international trade of the country. The policy deals with imposing taxes on imports, export, tariffs, and quota and inspection laws. Many economic students ask what is trade policy and what its purpose is. A trade policy centers on a few core issues, like tariffs, trade barriers, and safety.

Every country has the right to impose taxes on imports and exports. Some countries levy heavy import duties to protect local interests. In addition, there may be state-imposed restrictions on a specific product or on a particular nation. The most prevailing types of trade barriers are tariffs, quotas, subsidiaries and embargoes. The safety guidelines are articulated to ensure only high-quality import goods adhering to safety and quality standards enter the country.

Trade Policy Review Mechanism (TPRM)

One of the fundamental duties of WTO is to look what is trade policy of a member country. The surveillance activity is performed through the Trade Policy Review Mechanism (TPRM). WTO General Council (a full associate’s body) reviews the trade policy of a country in the Trade Policy Review Body under specific rules and procedures. The review process is chiefly peer-group appraisal, though the data is collected by the WTO secretariat.  

Annex 3of the Marrakesh Agreement signed by member countries in April 1994 gave TPRM exclusive right to review trade policies of individual countries and chartered it as one of the basic functions of WTO. The objective of TPRM, as defined in Annex 3of the Marrakesh Agreement, is to facilitate seamless multilateral trading and to enhance the transparency of member's trade policy. All WTO members are subjected to review under TPRM, four members with the lion's share of world trade ( presently Japan, China, EU, and the US) are reviewed every two years, the following sixteen evaluated every four years, and the rest reviewed every six years. In addition, underdeveloped economies are assessed over a longer period.

WTO`s Seventh Trade Policy

Recently WTO`s seventh trade policy was held in Geneva, Switzerland, on 6th January 2021. The last TRP review on Indian trade policy took place in 2015. The Indian delegation team was headed by the commerce secretary, where he expressed concern about universal health and economic crisis due to pandemic Covid-19.and he also stated how the Indian Government is relentlessly addressing these challenges through various programs, including the Atma Nirbhar Bharat initiative.

In WTO`s seventh trade policy, the organization appreciated the introduction of the Goods and Service Tax (GST) in 2016, and India was appreciated to honor and implement WTO's Trade Facilitation Agreement. WTO estimated the Indian economic growth of 7.4% during the period under assessment and made a positive note of the reform programs. The “Ease of Doing Business' ' policy was appreciated and attracted a lot of FDI investment. The review also stated robust economic growth improved socio-economic indicators such as life expectancy and per capita income. India also inched up in the indicator of “Trading across Borders“. The review report also noted the National Intellectual Property Right initiated in 2016.

Applauding the Initiatives

In the opening speech of WTO`s seventh trade policy, chairperson of TRP body, Ambassador Mr. Harald Aspelund of Iceland, applauded the initiatives that shaped strong economic growth for the period under review. He also congratulated the programs to facilitate women's contribution to the economy. India's quick, comprehensive response to seven hundred questions from WTO members ahead of the TRP review was also thanked. Developed and industrialized countries asked for a more liberalized policy regarding agriculture, harmonizing international standards and regimes. Several members acknowledged India's strategic and trading importance and wished to continue the bilateral relationship. Many members applauded India's pivotal role in WTO and appreciated her pursuance of developing and least developed countries (LDCs).

Public Stock Holding (PSH) Issue

In WTO`s seventh trade policy review meeting, India requested the organization to permanently resolve Public Stock Holding (PSH) issue regarding food security. Many governments use the Public Stock Holding program to purchase stock and distribute it to needy people. WTO assumes the PSH program distorts trade when the Government purchases food from farmers at a fixed price known as supported or administrative price. India asked for a complete exemption from subsidiary cut commitment, as the Indian population needs it. In addition, India notified WTO about several schemes to support agriculture under Green Box, supplementing current subsidies available to low–income, resource-poor farmers.

Implementation of GST

The TRP review committee applauded the successful implementation of GST; the system is expected to widen the tax base and minimize tax evasion. As the tax is collected at each contact point, the possibility of tax evasion lessens significantly. The GST tax is levied on value addition; the taxpayer may get a credit at the previous production stage. As GST surpasses all previous taxes, a taxpayer need not maintain records or comply with indirect taxes. TRP also acknowledged GST had streamlined the tax structure as uniform tax is imposed at central levels and states and in-between states. GST has ensured the free flow of goods within the country, reducing logistics and overall costs of goods.