World trade organisation

World trade organisation

09-03-2023

World trade organisation (WTO)

About WTO

  1. The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations.
  2. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to ensure that trade flows as smoothly, predictably and freely as possible.
  3. It officially commenced operations on 1 January 1995, pursuant to the 1994 Marrakesh Agreement, thus replacing the General Agreement on Tariffs and Trade (GATT) that had been established in 1948.
  4. The WTO is the world's largest international economic organization, with 164 member states representing over 98% of global trade and global GDP

 

ORGANISATION

  1. The WTO is headquartered in Geneva, Switzerland.
  2. Its top decision-making body is the Ministerial Conference, which is composed of all member states and usually convenes biennially; consensus is emphasized in all decisions.
  3. Day-to-day functions are handled by the General Council, made up of representatives from all members.
  4. A Secretariat of over 600 personnel, led by the Director-General and four deputies, provides administrative, professional, and technical services.
  5. The WTO's annual budget is roughly 220 million USD, which is contributed by members based on their proportion of international trade.

 

FUNCTIONS:

  1. Promotion of growth by facilitating trade is the most important function of WTO. Other important functions include:
  2. It oversees the implementation, administration and operation of the covered agreements (with the exception is that it does not enforce any agreements when China came into the WTO in Dec 2001)
  3. It provides a forum for negotiations and for settling disputes.
  4. Another priority of the WTO is the assistance of developing, least-developed and low-income countries in transition to adjust to WTO rules and disciplines through technical cooperation and training.

The WTO's achievements:

  1. The following accomplishments have been credited to the WTO during its brief existence:
  2. The general rule now is to be more market-oriented. 
  3. The use of restrictive measures to address BOP issues has significantly decreased;
  4. As with goods, services trade has entered the multilateral system, and many nations are opening up their markets to trade and investment, either unilaterally or through regional or multilateral negotiations;
  5. Protection based on tariffs is now the norm rather than the exception;
  6. Numerous UDCs have implemented radical domestic, trade, and exchange reforms that have increased economic growth, increased investment opportunities, and improved resource utilization efficiency;
  7. A procedure for continuous monitoring of developments in trade policy has been established by the trade policy review mechanism;
  8. Based on the Swiss Formula, it has been agreed to lower import tariffs on industrial goods. A non-linear Swiss formula is one in which tariff cuts are proportionally higher for initially higher tariffs. For example, a country that starts with a tariff of 30% on a product will have to cut costs proportionally more than a country that starts with a tariff of 20% on the same product.

 

WTO's limitations:

However, the WTO still needs to move forward or become more sensitive to the following issues:

  1. In many nations, the process of reforming trade is not finished. For instance, there are still some high tariffs, over which negotiations are continuing at various levels, particularly in the areas of financial services and basic telecommunications;
  2. In some developing nations, it appears that the overall process of liberalization has undergone at least some reversals. Anti-dumping measures that are being increased, selective tariff increases, and investment-related measures are examples of this;
  3. Additionally, the WTO has not been sufficiently alert to the emergence of anti-dumping duties and other non-tariff barriers to imports from the UDCs;
  4. Even though doing so puts the local population in danger for their health and safety, transnational corporations' interests in international trade take precedence over local concerns and policies.
  5. The problems with implementation are becoming a major source of concern: These problems include demand to correct while asymmetries in TRIPS, TRIMS, anti-dumping, human movement, and other issues. remain. Services, agriculture, textiles, industrial tariffs, including peak tariffs, and other issues require WTO attention.
  6. It is becoming more and more common for the developing world to adhere to the policies and rules that are advantageous to the industrialized world. Consequently, the "one size fits all approach" is becoming increasingly ingrained in WTO regulations and practices;
  7. The nations of the North have reaped the greatest benefits from the WTO. Progress has been much slower despite the fact that the UDCs receive the majority of the benefits of free trade;
  8. With growing social divisions, there have been concerns that the combination of globalization and technological change places a premium on high-skilled workers over low-skilled ones.

 

Trade Agreements under WTO

Here are some of the most significant trade agreements under the WTO:

  1. General Agreement on Tariffs and Trade (GATT): GATT was signed in 1947 and was the first multilateral agreement on international trade. It aimed to reduce trade barriers and promote international trade. GATT was replaced by the WTO in 1995, but its principles and rules still form the basis of international trade.
  2. Agreement on Agriculture (AoA): The AoA was signed in 1994 and aims to liberalize trade in agriculture. The agreement sets rules for subsidies, market access, and domestic support for agriculture.
  3. Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS): TRIPS was signed in 1994 and sets minimum standards for protecting and enforcing intellectual property rights, such as patents, trademarks, and copyrights.
  4. General Agreement on Trade in Services (GATS): GATS was also signed in 1994 and aims to liberalize trade in services, such as banking, telecommunications, and tourism. The agreement sets rules for market access, domestic regulation, and transparency.
  5. Information Technology Agreement (ITA): The ITA was signed in 1996 and eliminated tariffs on information technology products among participating countries. It was expanded in 2015 to include additional products.
  6. Trade Facilitation Agreement (TFA): The TFA was signed in 2013 and aims to simplify and streamline customs procedures to make international trade easier and more efficient.
  7. Environmental Goods Agreement (EGA): The EGA is currently under negotiation and aims to eliminate tariffs on environmental goods, such as renewable energy products and energy-efficient technologies.

 

Doha Development Agenda

  1. The Doha Round of multilateral trade negotiations began in 2001, and it has been characterized by persistent differences among the United States, the European Union, and developing countries on major issues, such as agriculture, industrial tariffs and non-tariff barriers, services, and trade remedies.
  2. Developing countries have sought the reduction of agriculture tariffs and subsidies among developed countries, non-reciprocal market access for manufacturing sectors, and protection for their services industries.
  3. The United States, the European Union, and other developed countries have sought increased access to developing countries' industrial and services sectors while attempting to retain some measure of protection for their agricultural sectors.
  4. The G-20 leading economies have repeatedly called for conclusion of the Doha Round as a way to bolster economic confidence and recovery, but there has been frustration over the ability of WTO member states to reach a comprehensive agreement.
  5. Negotiations on a plurilateral services agreement that would expand disciplines in services beyond the General Agreement on Trade and Services (GATS) have begun among 47 developed and advanced developing countries, and negotiations to expand the scope of the current plurilateral Information Technology Agreement (ITA) have also been proposed.
  6. Agriculture has become the linchpin of the Doha Development Agenda, and the United States seeks reductions in trade-distorting domestic support; elimination of export subsidies, and improved market access in both developed and developing countries. Developed countries generally are seeking improved market access for their services industries in developing countries.
  7. SEVERAL ISSUES are among the most important to developing countries, including concessions on agriculture, compulsory licensing of medicines and patent protection, trade facilitation, and a review of provisions giving special and differential treatment to developing countries.
  8. Members of Congress are likely to scrutinize any agreement that may require changes to U.S. trade remedy laws.

 

Reforms Needed At WTO

Some of the reforms that have been proposed:

  1. Strengthening dispute settlement mechanisms: The WTO's dispute settlement system has been a key part of the organization's work, but it has faced challenges in recent years, including the blocking of appointments to the Appellate Body. Some have called for reforms to the system, such as the establishment of a permanent Appellate Body or the creation of an alternative dispute resolution mechanism.
  2. Updating rules to reflect modern trade: The rules governing international trade were largely established in the 1990s and may not reflect the current reality of global trade, which includes the rise of digital commerce and new forms of state intervention in the economy. Some have called for updates to the rules to address these issues.
  3. Addressing concerns of developing countries: Many developing countries feel that the WTO has not done enough to address their concerns, including issues related to agriculture and access to markets. Some have called for reforms to ensure that the organization is more responsive to the needs of developing countries.
  4. Addressing concerns of environmentalists and labor groups: Some critics of the WTO argue that the organization's focus on trade liberalization has come at the expense of environmental protection and labor rights. Some have called for reforms to ensure that trade policies are more aligned with these goals.
  5. Improving transparency and participation: Some critics of the WTO argue that the organization's decision-making processes are opaque and undemocratic. Some have called for reforms to ensure that decision-making is more transparent and that civil society has a greater role in the organization's work.
  6. Addressing the challenges of globalization: Globalization has brought both benefits and challenges, including rising inequality and social unrest. Some have called for reforms to the WTO to address these challenges, such as by promoting greater social and economic inclusion.

It is worth noting that there is not a consensus on what reforms the WTO needs, and different stakeholders have different priorities. Nonetheless, there is broad recognition that the organization faces significant challenges and that reforms are needed to ensure that it can continue to play a meaningful role in regulating international trade.

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