WTO and the multilateral regulation of trade and investment
The WTO, set up on 1 January 1995 in Geneva, runs the rules of world trade. Its core is non-discrimination: MFN and national treatment.
WTO principles
| Principle | Meaning |
|---|---|
| Most-favoured-nation (MFN) | A trade advantage given to one member must be given to all members (GATT Article I) |
| National treatment | Imported goods, once inside, must be treated no worse than local goods (GATT Article III) |
| Freer trade | Barriers are lowered gradually through negotiation |
| Predictability | Bound tariffs and transparency, checked by the Trade Policy Review Mechanism |
| Fair competition | Rules on dumping and subsidies |
| Special and differential treatment | More time and flexibility for developing countries |
Key agreements
| Agreement | Covers | Remember |
|---|---|---|
| GATT 1994 | Trade in goods | Updated version of GATT 1947 |
| GATS | Trade in services | Four modes of supply |
| TRIPS | Intellectual property rights | Minimum standards; patents for at least 20 years |
| TRIMS | Investment measures that distort trade in goods | Bans local-content and trade-balancing requirements |
| AoA (Agriculture) | Farm trade | Three pillars: market access, domestic support, export subsidies |
| SPS and TBT | Food safety and plant/animal health; technical standards | Standards must not be disguised barriers |
| Anti-dumping, SCM, safeguards | Trade remedies | Answer unfair pricing, subsidies or sudden import surges |
| TFA | Trade facilitation | Faster customs procedures; in force since 2017 |
| DSU | Settlement of disputes | Panels, Appellate Body, Dispute Settlement Body |
GATS: four modes of supply
| Mode | Name | Example |
|---|---|---|
| Mode 1 | Cross-border supply | An Indian IT firm serving a US client online |
| Mode 2 | Consumption abroad | A foreign patient treated in a Chennai hospital |
| Mode 3 | Commercial presence | A foreign bank opening a branch in India |
| Mode 4 | Presence of natural persons | An Indian engineer working onsite in the US |
AoA boxes for domestic support
| Box | Meaning |
|---|---|
| Amber | Trade-distorting support such as price support; must be reduced, with a small de minimis allowance |
| Blue | Amber-type support tied to production-limiting programmes; exempt from cuts |
| Green | Minimal or no distortion, such as research, extension and environmental programmes; exempt |
| Development (Article 6.2) | Input and investment subsidies for low-income farmers in developing countries; exempt |
Dispute settlement steps
The Appellate Body has had no quorum since December 2019; some members use an interim appeal arrangement (MPIA).
Regulating investment multilaterally
- There is no single global investment treaty; most rules sit in bilateral investment treaties (BITs) and trade agreements.
- Within the WTO, TRIMS covers investment measures that affect goods trade, and GATS Mode 3 covers investment in services.
- The OECD's Multilateral Agreement on Investment (MAI) talks collapsed in 1998.
- The World Bank Group adds MIGA (political-risk guarantees) and ICSID (investor-state dispute settlement).
- Exceptions to MFN: free trade areas and customs unions (GATT Article XXIV) and preferences for developing countries (Enabling Clause, 1979).
NET asks you to match agreements with their subject (TRIPS, TRIMS, GATS, AoA), to order GATT-WTO milestones, and to tell MFN from national treatment in a statement pair.
Typical MCQ: “Which WTO agreement prohibits local-content requirements on investors?” TRIMS. Trap: TRIPS is about intellectual property, not investment.
Typical MCQ: “A patient flies from Kenya to Chennai for surgery. Which GATS mode?” Mode 2, consumption abroad: the consumer moves.
Typical MCQ: “Which is the WTO's highest decision-making body?” The Ministerial Conference, meeting at least every two years. Trap: the General Council runs day-to-day work.
GATS modes C-C-C-P: Cross-border, Consumption abroad, Commercial presence, Presence of natural persons. AoA pillars M-D-E: market access, domestic support, export subsidies.