The World Trade Organisation: An Insight

Executive Summary

EXCECUTIVE SUMMARY

This report has been prepared to give its readers an insight about the most popular global institution, World Trade Organisation (WTO) which has been managing international trade and commerce in between 164 countries. The institution has been able to bring in economic development in its member countries by promoting sustainable economic development and alleviation of poverty. The trade agreements made and signed by member nations are protected under WTO agreements which help its members make their businesses conduct in efficient and risk-free manner. The practical examples provided in the report will give strong evidence to its readers about the affirmation of above statement and benefits WTO has provided to the world trade. This report has also reviewed criticisms and challenges faced by WTO in its growth path and the way it treats its member nations equally.

INTRODUCTION

The World Trade Organisation (WTO) is an international organisation that assists government and nations in facilitating trade of manufactured goods and services that includes insurance, banking, telecommunication, tourism and many other sectors. WTO is a replacement of General Agreement on Tariffs and Trade (GATT) and was established in the year 1995 (World Trade Organization, 2015). The main objective behind formation of WTO was to provide free flow of trade between countries in a fair manner. The central idea between its systems promotes settlement of disputes by defining rules and timelines for settling disputes. Presently there are 164 members of WTO which represents 95% of total trade worldwide where observers seek getting membership (Howse, 2016).

 

ANALYSIS AND DISCUSSION

Just after the Second World War many countries became economically depressed when the allied countries, led by government of US, thought of undertaking a promotional plan to spread liberal capitalism, enhanced world trade and economic-cooperation. These ideas were based to promote global and international businesses while preventing them from getting into global conflicts. GATT and WTO always supported easy flow of trade and they prove to be very are significant for bringing economic development in countries. Three basic functions provided by WTO are; removing trade obstacles, hosting negotiations among member nations and resolve disagreement of interest among member nations. The complexity and number of problems involved in international trade has often resulted in making the entire trade process slower than anticipated (Panagariya, n.d.). In last few decades, many issues have been seen arising in major sectors like agriculture, manufacturing and service industry. All the developed countries have their individual opinion regarding nature of trade and thus many issues are caused due to imposition of tariffs through developed countries on merchandise coming from other developing countries. The agricultural subsidies maintenance also acts as a trade barrier and has become a serious reason for conflict between US and EU which even resulted in Banana Trade War between those countries. The dispute was concluded in 2012 when EU agreed to reduce the tariff after eight-year long time period.

The international trade laws contributed by WTO facilitate globalisation in which major points followed by organisations have provided world with positive business approach. Trade without discrimination is provided by WTO as it does not allow making favouritism among its members (Kim, n.d.). If any WTO member wishes to grant any trade benefit to other member like provision of products with lower taxes, such advantages will be applicable to all other fellow members. This kind of treatment is considered to be like that of MFN treatment in which adhering with such principles contributes in positive international trade by giving all the members equal opportunities. WTO provides freer trade by maintaining intensive negotiations among members to minimise trade barriers while encouraging them to get involved in international trade. Moreover, organisations also do not demand for any harsh claim or any kind of ultimatums for helping developing nations by implementing changes gradually. Since developing nation’s posse’s weak economic development, any kind of pressure from developed country can make negative effects on them along with making them more fragile on various aspects (Javorcik & Narsico, 2017). Therefore, global trade is encouraged by WTO by ensuring members getting involved in fairer trade and also economically weaker nations are supported by developed countries by getting advantaged from principles and guidelines of WTO.

Analysis and Discussion

Transparency and binding maintained by WTO through predictability nature has brought revolution in providing world with efficient measures for export and import facility. WTO guards its member a country from realising loses by predicting future changes or regulatory modifications that can be made by another member country. As a result, more and more members get engaged actively in trade between themselves (World Trade Organization , 2017). However, any associate can initiate changes in tariffs or other trade legislations that are agreed between trading partners and any compensation realised can be paid accordingly. This principle of WTO contributes in international trade by encouraging members work confidently and get engaged in foreign countries without fear of any uncertain changes in partner country’s legislation and trade agreement. Fair competition provided by WTO with its undiscriminating policy protects its members from getting abused by other members. In other term it can be said that rules and guidelines laid in WTO agreements allows its members to establish basic tariffs and in case it is not, made clear then other member nation has the right to abandon their commodities within that nation. Fair competition rule does not permit WTO members protect their economies from commodity dumping to ensure that no members are disadvantaged from discrimination rule and even promotes fair trade among member nation organisations.

WTO also encourages economic raise and development of dynamic organisations by developing countries economic conditions through elimination of poverty (Stewart & Bell, 2015). Some of the members of developing countries have not integrated key elements of free market financial system in their national economies. Such countries are assisted from the global institution to provide positive contribution for developing their country economy in several ways. For example, sixty developing nations have put into practice trade liberalisation and economy programmes at the time of Uruguay Round which lasted for 8 years. The economic reforms among developed nations is positively correlated to the level of global trade as more countries get developed with larger number of imports and exports involving more countries. Apart from the above-mentioned contribution of WTO, it has supported its member nations in many ways by protecting government from getting consternation, raising governmental incomes, enhancement in variety of goods among countries, and providing help for bringing new idea in front of the world.

The decision-making system within WTO is also an important topic for discussion as it is directly related to the outcomes realised by countries who involves WTO in their international dealings. The system of WTO in making trade agreements and negotiation contract comprises of two fey features. The first principle states that decision made by members will be based on voting system which is one vote per nation. This sovereign principle is based on equality that makes WTO one of the classical global institutions. The next feature of WTO states using accord as the basis for making major decisions. This principle is followed since GATT’s time period and was laid in Marrakesh Agreement Establishing the WTO. Both the aforesaid features prove significant in providing with democratic theory. In international level, issues among global organisations can happen between formal members but their conflicts can hamper citizens belonging to organisation’s countries and member states. Hence, the participation of each member along with civil society organisations like NGO’s are also encouraged in decision making of WTO to make contribution to democratic judgement. Democratic theory, if applied to international institutions, can be supposed by member countries for making individual or corporations get involved in decision making process by nation’s government. However, it is not necessary that they will be given access by WTO. Domestic laws and other personal interests can make national officials negotiate on behalf of their own nation which can affect the legitimacy of international regulations.  Again, if all the representatives do not attend decision making process equally, the end result of negotiations will not adequately fulfil the needs of unattended ones. Therefore, national laws do not admit state representatives at global negotiations act for providing fair procedures.

Decision-Making System within WTO

The value of WTO to world development always depends on environmental and political factors. It can be questioned that whether WTO can provide with better international trade or will global economy become depended on transnational transactions and liberal economies.  If international economy is being dominated by transnational transaction and liberal economy, then it can be said that WTO is needed severely even if the results are below expectations. If the achievements are realised by trade agreements, the policy of seeking full accord from member nations can be abandoned but, this process is very risky and very difficult to be managed (New Internationalist, 2016). The latest agreement of WTO was made after recognising elements from wider agenda that was projected to be argued but the result of it that provided with limited agreement, did not make impression on many people. Organisations as well as individuals see that global supremacy and liberal economy as a devastating element for global expansion and thus assumes WTO as a part of issue in globalisation process. WTO enhances development of wealthy nations by imposing their policies on underdeveloped and weaker countries. As a result, negotiations are never carried out between identical partners and favouritism is created for developed nations. Among two opposing views there are other people who visualises no other alternative institution than WTO and even believe that its urge to promote development worldwide are depended on finding new ways that are flexible in nature with less cumbersome and more indulgent with developing nations.

Developing nations has to face constant challenge while bridging gaps between themselves and industrialized and developed countries. Due to lack of capital, these countries always try to implement technological innovation in optimal costs which sometimes makes impossible for them to achieve technological innovation in cost reductive way (Aaronson & Abouharb, 2013). Developing countries are constantly facing the challenge of bridging the technology gap between them and other developed and industrialized counterparts. Another disadvantage found in WTO membership is that benefit to one area leads in bringing disadvantage elsewhere. For example, member’s countries under National Treatment principles and MFN have an obligation in regards to reciprocity which states that all the member countries cannot eternally gain access to the markets of other nations without allowing others entering into their marketplace. This disadvantage is particularly for those members who lack competitiveness in their market as compared to developed countries market and thus market remains unfavourable for them which even results in breakdown.    

Disadvantage related to WTO rules like invoking numerous prospects provided under WTO guidelines have also made many countries lost their interest in WTO as these prospects requires lot of time while the countries need prompt response. On the other hand, WTO even has to face many challenges that may undermine organisation of global management and administration process in regulating international trading system (ICTSD, 2012). Since there are many countries that required being managed simultaneously, the WTO operations becomes ineffective many times for trying to maintain balance between them. Many of the member countries do not limit their trading with member countries only and participates with non-member countries also. This has added challenge while implementing development facet of WTO as development programme cannot be restricted to member nations only. This makes WTO require joining hands with other non-members and make them insist to join WTO. The operational procedure and structure of WTO also poses few issues in decision making, predecessor and its voting system where one country, whether small or big, is given right to vote once only. This has even made WTO come under subject of manipulation from political interests of member nations. It is indispensable that countries protect their national interest and being a member organisation, political role are bound to come between countries declination in trading with other members on political and discrimination grounds. 

Criticism and Challenges Faced by WTO

WTO is also being criticised by a lot of groups with their opposing views towards world development. Many of the criticiser’s doubt in the efficiency of multilateral approach of WTO towards trade negotiations, as WTO principles make successful negotiations very difficult to achieve. Although WTO is recognised as a big force that influences international operations between its members, the organisation has been able to acquire many criticisms against it in various aspects (Dudovisky, 2013). WTO has been able to maintain in reduction of sociological gaps among poor and rich but its policies and practices produces reverse results many times by widening the gap. The developing nations are the ones who realises the lowest benefit from WTO for several reasons, especially because of anti-dumping channel against them. Theses promotes barrier in agricultural production in developed nations and the WTO gets influenced by developed and richer countries for supporting them. Again, WTO includes environmental and labour issues also because of inefficient and complex decision making. The ignorance of environmental and human factors can cause massive problems along with other ecological imbalances in long run. However, the productive results of WTO cannot be overlooked and the way it has made all its members depended on each other that can even avoid in future wars.

The economic and financial growth of Asian countries is one of the finest examples that prove how member nation benefits from global institutions like WTO. WTO has been able to eliminate trade issue of 21^st century where financially salient Asia has involved itself in supply chain over past few decades by experimenting with regional trade contacts and economic regulations to sustain in between fragile economy. The RCEP (Regional Comprehensive Economic Partnership) of Asia and TPP (Trans Pacific Partnership) of US are competing to put values for Asian operations and supply chains. In this case, the Asian countries experience of taking new approach to sustain economic growth with WTO as a forum for improving global trade governance shows the power of WTO in forming international business standards (Elgar, 2014). Asia has been a successful model through developed trade that had inspired many other countries to join hands with WTO for enhancing their global trade in expanded form.

Development in African economic sector is also being observed that shows promising nature of WTO. As world trade slowed down in recent years, Africa was the only nation who showed double digit growth expansion in terms of export and import. Although trade plays a significant part in making Africa the most rapidly growing nation worldwide, trading has became even more powerful for enhancing prosperity in the country and alleviating poverty, especially in developing regions (Chemutai & Low, 2017). WTO provides all the necessary elements for fulfilling global tasks unless African nations are not legally bound to open their markets not only for production but even for technical assistance. The capacity required for building expansion of exports and import leads shows that they have recently gained many benefits from WTO  (Business Report, 2015). Although WTO is an expert in forming international trade, the prolonged deadlock in Doha round threatened the trustworthiness of the institution. The Doha development criteria negotiations should have been delivered as an important push to economic development of Africa by opening its market to export interest of African countries (Baldwin, 2016). Here WTO needs to convey on Doha development agenda failing which the member countries may divert their effort and energy. 

CONCLUSION

The above discussion and analysis made on WTO shows the way global institutions help manufacturers and traders in dealing with cross border transactions. The global institutions are highly responsible for bringing economic development in many countries while making a way to eliminate poverty in countries. Although many challenges and criticisms came in the pathway, but with strategic decisions, WTO had been able to sustain the global trend in effective manner. The increase in foreign exchange and diversification of organisations businesses has paved way for generating sustainable business developments in which WTO plays a significant role by protecting international trade contracts and other specified goals. Therefore, it can be said that every country must participate in world trade through a mutual agreement that can be managed in unbiased way through a global institution like WTO. 

This report has been prepared to give its readers an insight about the most popular global institution, World Trade Organisation (WTO) which has been managing international trade and commerce in between 164 countries. The institution has been able to bring in economic development in its member countries by promoting sustainable economic development and alleviation of poverty. The trade agreements made and signed by member nations are protected under WTO agreements which help its members make their businesses conduct in efficient and risk-free manner. The practical examples provided in the report will give strong evidence to its readers about the affirmation of above statement and benefits WTO has provided to the world trade. This report has also reviewed criticisms and challenges faced by WTO in its growth path and the way it treats its member nations equally.