Relevance Of The World Trade Organization In Promoting Global Trade Today

History

Over the years, international trade has been playing an empirical role in the assistance of the economic development and promotion of the peaceful relations among various nations. Today, the World Trade Organisation (WTO) is the only organisation that governs the rules of the international trade between the countries. The organisation is based on the international trade agreements signed between different countries engaged into the international trade practices. Thus, the aim behind the establishment of the organisation is to liberalise and supervise the international trade practices. The following report is aimed at exploring the various facets of the organisation such as the history, functions, challenges, advantages, disadvantages, and a case study on a country in relation to the powers of the World Trade Organisation.

Before introduction of the World Trade Organisation, the General Agreement on Tariffs and Trade (GATT) was regulating the international trade. A group of 23 nations were signatory to the GATT, since the October 30^th, 1947 (VanGrasstek, 2018). The GATT was formed with the aim of promotion of the international trade, on the principles of reciprocity and mutuality. This was to be done by the reduction and the elimination of the trade barriers namely the quotas and tariffs. A number of attempts were made during the decade of 1950s and 1960s to formulate a framework for the international trade, in the shape of an institution. However, despite the various attempts, nothing marginalised until January 1995, which marked about 50 years of operation of the GATT and the formation of the WTO. While the operation of the GATT led to some significant growth rates in international commerce, the primary reason for the attempts to replace the same was the inadequacy of regulations, which would enable the adaptation to the globalised economy and the business practices (Hoekman and Kostecki, 2009).

The GATT went through various rounds of reforms, which finally led to the formation of the WTO in the year 1995 (Verger, 2010). The major of it was the right GATT round also known as the Uruguay Round, which was introduced in the month of September of the year 1986 (Koul, 2018). The said round is popular because of the fact that it is until date regarded as one of the biggest mandate on the lines of the negotiation. The negotiations were initiated mainly with the aim of achieving an extension of the trading system into various new fields. Finally, the Marrakesh Agreement concluded the formation of the WTO.

The birth of the WTO in the year 1995 is regarded as the one of the biggest reforms since the end of the Second World War. This is because of the inclusion of the trade in services and intellectual property, which were not covered earlier in the GATT (Chang and Lee, 2011). The GATT would mainly deal in the trade in goods. In addition, the creation of the WTO led to the reforms in the areas of textiles and agriculture sectors (Dutt, Mihov and Van Zandt, 2013).

The structure of the WTO is ruled by the Ministerial Conference, which is regarded as the highest authority as visible in the image above. The said authority is comprised of the various representatives of all WTO members and is enabled with the powers of taking decisions with respect to the multilateral trade agreements. The General Council, which also comprises of the WTO members, is entrusted with the responsibility of managing the day-to-day affairs of the organisation (Vranes, 2009). The General Council further shares its responsibility with the other subsidiary bodies namely the councils. There are three major councils namely the council for Trade in Goods, the council for Trade in Services and lastly the council for Trade-Related Aspects of Intellectual Property. A number of other councils handle the incidental work, as depicted in the image. Further, there are various committees such as the Committee on Trade and Development, Committee on Balance of Payments, Committee on Budget, and others alike. These committees are further responsible for holding consultations on the various matters as dependent on the area of their work. In addition to the above, there are management bodies as established by the four-plurilateral agreements of the WTO governing the areas of dairy products, bovine meat, government procurement, and civil aircraft.

Background

The expert representatives of various capitals, in suggestion with the industry advisors, government, business organizations, and other interest groups such as that of trade unions, farmers and consumers; out forward the views and suggestions. This is done via attending of the meeting in between at WTO headquarters among the various negotiating and administrative bodies. Thus, various groups based on the geographical area, matter of interest work under a single spokesperson during the time of the meetings and negotiations. One such large group is that of the European Union and its 15 member states, the basis of formation of which is single external trade policy and tariff among the member states. Some other groups are that of Association of South East Asian Nations (ASEAN) countries, NAFTA (Canada, US and Mexico), the African, Caribbean and Pacific Group (ACP) and others.

The WTO follows the GATT tradition, in terms of the decision-making policy. The decisions are thus based on “consensus” and not on “voting.” In the event when the achievement of the consensus is not possible, the voting is resorted to. The voting is based on the principle of “one country, one vote,” accordingly; the decisions are arrived by the majority of the votes cast in the favour of the proposed resolution (Wilkinson, 2013). The WTO Secretariat aids the management of the negotiations and the implementation of agreements, by assisting the WTO delegate bodies. The WTO budget is derived from the individual contributions received. It must be noted that these contributions are calculated based on ratio of shares to the total trade conducted by WTO members.

One of the significant functions of the WTO is to work together with the various international organisations such as the World Bank, the International Monetary Fund, and other similar multilateral associations (Davis, 2012). The aim behind the same is to promotes and introduce global economic policies with respect to trade between the countries. The Marrakesh Ministerial Meeting introduced the Ministerial Declaration, which accords the above function of the WTO.

Another major function of the organisation is to conduct the timely scrutiny of national trade policies. The Trade Policy Review Mechanism (TPRM), comprising of the Trade Policy Review Body (TPRB) has been envisaged for the same. Accordingly, periodical reviews are conducted. While the major traders namely the European Union, the United States, Japan and Canada are subject to the reviews within every two years, the others are subjected to review either in every four years or every six years, depending upon the their share of world trade.

Some other major functions of the WTO are the international trade negotiations as initiated during the Doha Development Round, resolving the international trade disputes and formulating the overall trade agreements by incorporating the various applicable legal rules of trade (Davis and Bermeo, 2009).

It is significant to note that the European countries together are one major participant in the WTO (Orbie, 2016). The EU Trade Commissioner represents the EU in the highest decision-making body i.e. the Ministerial Conference. Recently UK and Europe filed for the separation of agreements with the WTO in July 2018. Until then, the UK was a member of Europe and thus an active participant in WTO since the very beginning (Miles, 2018). Some major achievements of the WTO over the years have been in the form of liberalisations of international telecoms, elimination of the agricultural subsidies, trade reforms in the information technology products, developing a new trade facilitation agreement and many more (UK Trade Forum, 2018).

Organizational Structure of WTO

As mentioned earlier that WTO is an organization that regulate and governs international trade, therefore there are many advantages of the existence of this organization. The same are detailed in separate headings as below in respect to UK over the years and generally:-

• Handling of Disputes: – This is the greatest advantage that WTO provides. When it comes to the international trade there are high chances of disputes. In such a situation, WTO provides a smooth, constructive, and peaceful manner to resolve those disputes. In absence of WTO this disputes can be so serious between/among members countries.
•  
• Rules make the transactions easy: – WTO provides set of rules that members companies are adhere to follow. All the member nations know that what WTO expect from them and what is the correct manner to deal with other nations complying the rules prescribed by WTO. This structure makes the international translations easy to go. By the virtue of WTO, the country Britain had got the benefits in the rights and obligations in merchandise trade, as a part of the Europe.
• Trade with different countries leading to the economies of scale: – The country UK has had a number of agreements signed with non-European countries over the years, by virtue of its EU membership (The Guardian, 2018). By providing free trade facility, WTO encourage the production at a high quantity. It promotes more economies of scale. The industries with high fixed cost get benefit from this feature (Econ.economicshelp.org, 2018).
• Basic principles make life more efficient: WTO have it’s certain principles such as transparency, non-discrimination, certainty about trade conditions and so on. These principles make the vision of WTO clear and make the economic system more efficient. Because of these principles, life becomes easy of those organizations that are directly involved in international trading as these principles makes the trading simple, increase confidence and help to reduce the cost. The same also increase the job opportunities and better goods and services for customers.
•  
• Promoting Good governance:- It is one of the lead advantage of WTO. By setting the rules and principles for all the member states, this organization ensures good governance practices. It reduces the level and opportunities of corruption. Members states are aware that what behavior is expected from them and breach of any provision of WTO can bring adverse impact to them. It also discourages many of the unwise policies and ensure that all the members states practice the best policies considering interest of other parties.
• Increase foreign income:- An organization faces lower trade barriers when the same acts through WTO (Hoffmann and Kumar, 2013). In such a manner imports and exports becomes smooth and countries earn more foreign income.

The aforesaid are few of the advantages of WTO, many others too are there. Nevertheless, this would not be correct to state that this organization only has advantage. In conjunction with the advantages, many disadvantages of this organization are also there which are necessary to be studied here. The same are mentioned below-

• Combined benefits: The benefits to the UK would better be yielded as part of Europe only because and not in the light of recent Brexit. This is because the power of Britain is amplified only when part of EU because of the top level political collaboration leading to increased economic heft. Thus, the UK might not be able to reap the similar benefits in WTO because of virtually less power.
• Rules for developing countries:- WTO has developed so many rules which does not seems to be fair for the developing counties, this is the reason that WTO often has been criticized for making the trade rules which are unfavorable (Sattler and Bernauer, 2011). While the major players like UK and other developed countries experienced tariff protection over a period, because of which these countries became successful. The same must be enabled to protect emerging and new domestic industries of developing countries as well.
• TIPP trade deals:- These deals are away from WTO. Cause of these deals WTO is being ignored and overshadowed as the deals only focuses on big European countries and US. The same does not include other counties like South Africa, Brazil, China, India, and Russia. The deals are diminishing the international value of WTO.
• Long Process of rules generation;- WTO Trade deals took so long to develop. Therefore the counties are forces to search and seek another alternative such as local bilateral deals or TIPP. Again, it remains no benefit of the existence of WTO.

Conclusion

As per the discussions in the previous parts, it can be concluded that trade and commerce are the significant elements for the overall success of the nation and promoting the positive business and incidental relationships between the nations. In light of the above statement, it must be noted that the introduction of WTO has simplified various facets of international trade practices. The organisation works on the pillars of the consensus, negotiation, representation of the nations and the dispute resolution processes. The organisation has a number of advantages in the context of UK as described above. The same are accompanied with few disadvantages for the developing countries. Nevertheless, the organisation has led to the makeover and introduction of a number of economic and political reforms over the years.

References

Chang, P. L. and Lee, M. J. (2011) The WTO trade effect. Journal of International Economics, 85(1), pp. 53-71.

Davis, C. L. (2012). Why adjudicate?: enforcing trade rules in the WTO. US: Princeton University Press.

Davis, C. L. and Bermeo, S. B. (2009) Who files? Developing country participation in GATT/WTO adjudication. The Journal of Politics, 71(3), pp. 1033-1049.

Dutt, P., Mihov, I. and Van Zandt, T. (2013) The effect of WTO on the extensive and the intensive margins of trade. Journal of international Economics, 91(2), pp. 204-219.

Econ.economicshelp.org. (2018) Advantages and disadvantages of WTO. [online] Available from: https://econ.economicshelp.org/2007/06/advantages-and-disadvantages-of-wto.html [Accessed on 23/12/2018].

Editorial. [online] Available from: https://www.theguardian.com/commentisfree/2018/aug/17/the-guardian-view-on-brexit-and-trade-the-wto-is-not-a-safety-net [Accessed on 23/12/2018].

Hoekman, B. M. and Kostecki, M. M. (2009) The political economy of the world trading system: the WTO and beyond. UK: Oxford University Press.

Hoffmann, J. and Kumar, S. (2013) Globalisation–the maritime nexus. In The handbook of maritime economics and business UK: Informa Law from Routledge, pp. 65-94.

Koul, A. K. (2018) World Trade Organisation: Its Birth and Background. In Guide to the WTO and GATT , Springer: Singapore, pp. 1-37.

Miles, T. (2018) Britain and EU formally start splitting WTO membership agreements [online] Available from: https://uk.reuters.com/article/uk-britain-eu-wto/britain-and-eu-formally-start-splitting-wto-membership-agreements-idUKKBN1KE2LJ [Accessed on 23/12/2018].

Orbie, J. (2016) The European Union’s role in world trade: harnessing globalisation?. In Europe’s Global Role, UK: Routledge. pp. 51-82.

Sattler, T. and Bernauer, T. (2011) Gravitation or discrimination? Determinants of litigation in the World Trade Organisation. European journal of political research, 50(2), pp. 143-167.

The Guardian. (2018) The Guardian view on Brexit and trade: the WTO is not a safety net

UK Trade Forum (2018) what role can the UK play in the world trade organization post-Brexit? [online] Available from: https://uktradeforum.net/2018/02/21/what-role-can-the-uk-play-in-the-world-trade-organization-post-brexit/ [Accessed on 23/12/2018].

VanGrasstek, C. (2018) The History and Future of the World Trade Organization [online] Available from: https://www.wto.org/english/res_e/booksp_e/historywto_e.pdf [Accessed on 23/12/2018].

Verger, A. (2010) WTO/GATS and the global politics of higher education. UK: Routledge.

Vranes, E. (2009) Trade and the environment: fundamental issues in international law, WTO law, and legal theory. New York, NY: Oxford University Press, pp. 52-54.

Wilkinson, R. (2013) The WTO: Crisis and the governance of global trade. UK: Routledge.

World Trade Organization (2018) WTO organization chart [online] Available from: https://www.wto.org/english/thewto_e/whatis_e/tif_e/org2_e.htm [Accessed on 23/12/2018].