WTO

A Constructive Analysis of WTO in Promoting International Trade

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Since the nineties of the most recent century and with the finish of the cool war, globalization is the new catchphrase that has come to direct the world. On the off chance that we see to the walk of advancement of from mid1700’s till date, globalization has nearly turned into the piece of universal exchange. The outcome is the development of the specialization in global exchange terms of trade of the merchandise, administrations, and assets. With the progression of time, globalization has turned into a profoundly established marvel. The outcome is an item that has been produced in the outmost piece of the globe could undoubtedly discover its way into the market at the other corner of the globe. As this pattern turn out to be increasingly entrenched, savvy people gave it hypothetical support for the harmonization of such pattern, and that sponsorship was World Trade Organization (WTO). WTO is a standout amongst the most effective universal bodies. Its fundamental point is to advance business interests, and any obstructions in the way of improvement and development of worldwide business ought to be dealt with auxiliary. The main objective of the research is to study the involvement of the World Trade Organization (WTO) in international trade.

Research Questions:

  • What is the role of WTO in promoting international trade?
  • How does the WTO promote international trade?
  • How does WTO facilitate the countries in expanding their international business?
  • How does WTO handle disputes between its member countries?
  • How does it cooperate with IMF & World Bank?
  • How does WTO apply its established rules & regulations?

Research Methodology

The present research is descriptive and conclusive. The study was concluded on the secondary data sources of books, articles, journals, and e-sources.

Literature Review

Efforts to quantify the effects of the GATT/WTO have drawn upon an extensive and growing number of variable and model specifications, and estimation approaches. Tomz et al. (2007) found significant positive trade flow effects by including de jure and de facto membership. Subramanian and Wei (SW, 2007) exploit many asymmetries in the GATT/WTO membership and find large positive trade flow effects for industrialized countries and liberalized manufactured products (but not the case for developing countries and agricultural products). Liu (2009) criticizes the above studies for omitting zero trade flows; in addressing this issue, this author finds a significant positive trade effect of GATT/WTO membership. Mixed results are found by Herz and Wagner (2011) depending on the GATT/WTO negotiating period under consideration, by Chang and Lee (2011) when employing non-parametric matching methods, by Engelbrecht and Pearce (2007) for capital intensive goods (only), and by Balding (2010) using only export data.

Results from Eicher and Henn (2011) put the trade-facilitating impacts of the GATT/WTO squarely in doubt. Incorporating controls for unobserved bilateral-pair heterogeneity (i.e., natural trading partner effects) and individual preferential trade agreements (PTA)–features absent from all previous studies –these authors found an insignificant and sometimes negative trade flow effect of membership. Eicher and Henn (2011), however, omitted zero trade flows and thus could not capture potential GATT/WTO trade facilitation through an important channel–via the creation of new trade relationships. In including both formal and the participation-based definition of WTO membership proposed by Tomz et al. (2007), Roy (2011) found a mixed impact on membership (statistically positive, statistically negative, and insignificant) dependent upon the decade being considered.

Of particular relevance to the current study, Grant and Boys (2012) revisited SW’s (2007) result by addressing many of the commonly criticized empirical flaws in this literature -zero trade flows, country-time fixed effects, the decision to export (Helpman et al., 2008) -and included a more complete representation of agricultural trade (as compared to six sectors in SW (2007)). Contrary to SW (2007), these authors found strong evidence that the impact of GATT/WTO on trade varied by aggregated product categories (agriculture, non-agriculture); increases in trade of agricultural products by 161% and non-agricultural goods trade increases of 72% were attributed to membership in this organization. Given the dominance of agricultural products in portfolio products exported by developing and least-developed countries, not surprisingly these nations were found to particularly benefit from membership in this association.

Origin and History

The WTO’s predecessor, the GATT, was established on a provisional basis after the Second World War in the wake of other new multilateral institutions dedicated to international economic cooperation – notably the “Bretton Woods” institutions now known as the World Bank and the International Monetary Fund.

The original 23 GATT countries were among over 50 which agreed with a draft Charter for an International Trade Organization (ITO) – a new specialized agency of the United Nations. The Charter was intended to provide not only world trade disciplines but also contained rules relating to employment, commodity agreements, restrictive business practices, international investment, and services.

In an effort to give an early boost to trade liberalization after the Second World War – and to begin to correct the large overhang of protectionist measures which remained in place from the early 1930s – tariff negotiations were opened among the 23 founding GATT “contracting parties” in 1946. This first round of negotiations resulted in 45,000 tariff concessions affecting $10 billion – or about one-fifth – of world trade. It was also agreed that the value of these concessions should be protected by early – and largely “provisional” – acceptance of some of the trade rules in the draft ITO Charter. The tariff concessions and rules together became known as the General Agreement on Tariffs and Trade and entered into force in January 1948.

Although the ITO Charter was finally agreed at a UN Conference on Trade and Employment in Havana in March 1948 ratification in national legislatures proved impossible in some cases. When the United States government announced, in 1950, that it would not seek Congressional ratification of the Havana Charter, the ITO was effectively dead. Despite its provisional nature, the GATT remained the only multilateral instrument governing international trade from 1948 until the establishment of the WTO.

Although in its 47 years, the basic legal text of the GATT remained much as it was in 1948, there were additions in the form of “plurilateral” -voluntary membership – agreements and continual efforts to reduce tariffs. Much of this was achieved through a series of “trade rounds”.

Role and Functions of WTO in International Trade

World Trade Organization (WTO) has a crucial role to play in international trade, global economics, political and legal issues arising in international business because of globalization.

WTO has emerged as the world’s most powerful institution for reducing trade-related barriers between the countries and opening new markets. World Trade Organization is the only international governing body that World Trade Organization replaces General Agreement on Tariffs and Trade (GATT) which was created in the year 1948.

The goal of WTO is to provide a fair platform for its member countries to help in services like exports, imports and conduct their business in a peaceful manner. The advantage to the countries being members of the WTO is that that they lower trade-related barriers among themselves. In contrary to this the countries which are not part of WTO must negotiate trade-related agreements independently with their trading partners.

Almost all the industrial and agriculture sectors have been affected by trade barriers between the countries. The USA considered being a free-trade country because of fewer trade barriers for importing, but still, it has got many.

Role of WTO in International Business

  • WTO facilitates implementation, administration, and smooth operations of trade agreements between the countries.
  • It provides a forum for trade negotiations between its member countries.
  • Settlements of disputes between the member countries through the established rules and regulations.
  • It cooperates with the IMF (International Monitory Fund) and World Bank in terms of making cohesiveness in making global economic policies.

Overall WTO was set up to play a very important role in world economics through settling trade-related disputes through rules, regulations, and consensus-based agreement mechanisms that would prevent trade-related wars between powerful countries. Through resolving trade-related disputed WTO has got the potential to maintain world peace and bilateral relations between its member countries through following negotiations, consultations, and mediations.

Its main functions are

  1. To look after the administration of agreements signed at the Uruguay Round.
  2. To keep checks on the implementation of tariff cuts and reduction of non-tariff measures.
  3. To examine foreign trade policies of the member nations, and to see that such policies are in tune with WTO‘s guidelines
  4. To lay down methods for arriving at a harmonious solution in case of trade conflicts.
  5. To provide necessary consultancy to the member nations on the development in the world economy
  6. To provide a global platform where member nations continuously negotiate the exchange of trade concessions.

Role of WTO in Protecting International Trade

The protectionism which rose in worldwide exchange after the Second World War offered an approach to steady advancement, containing both one-sided progression and standards-based multilateral advancement. Globalization is the aftereffect of free or less limited exchanging merchandise, administrations, innovation, and capital among different nations. However there are different standing up to issues that limit the development of universal exchange, they are exchange obstructions, monetary help, robbery, and all the more particularly infringement of protected innovation rights. This happens due to various exchanging rules, non-appearance of correspondence, and so on. It is here where WTO gives a worldwide stage to the signatory nations to meet and examine their issues and to catch by and largely acknowledged answers for smoother change to more prominent unhindered commerce administrations. In this manner, WTO effectively contributes to the improvement of respective concessions to facilitate commerce in products, administrations, and innovation. WTO is the main universal association managing the worldwide tenets of exchange between countries. The World Trade Organization appeared with impact from 1-1-1995. The WTO supplanted General Agreement on Tariffs and Trade (GATT).

Its primary capacities are

  1. To take care of the organization of assertions marked at the Uruguay Round.
  2. To keep in mind the execution of levy cuts and decrease of non-duty measures.
  3. To analyze remote exchange approaches of the part countries, and to see that such strategies are tuned in to WTO’s rules.
  4. To set down techniques for touching base at a concordant arrangement if there arises an occurrence of exchange clashes.
  5. To give vital consultancy to the part countries on the improvement in the world economy.
  6. To give a worldwide stage where part countries persistently arrange the trading of exchange concessions.

The result is confirmation to the buyers and makers who realize that they can appreciate the more noteworthy selection of items and administrations. At the core of the framework are the WTO’s understandings, which are standard procedures for universal business and are marked by the exchanging countries.

Following are the primary standards of the WTO

  1. Non-separation: It infers both remote and national organizations are dealt with the same. Consequently, all countries ought to be dealt with similarly regarding exchange. Correspondence: Nations should endeavor to give comparable concessions to each other.
  2. Transparency: Negotiations must be reasonable and open with rules that meet for all.
  3. Special and differential treatment: It gives that creating nations may require ‘positive separation’ on account of noteworthy unequal exchange.

Findings:

The pace of international economic integration via the GATT and WTO rounds of multilateral trade negotiations has been slower and less comprehensive than some members would prefer. Some have suggested that there should be additional integration among subgroups of (often neighboring) member economies—e.g., those party to the European Union, the North American Free Trade Agreement (superseded by the United States-Mexico-Canada Agreement, signed in 2018), and the Asia-Pacific Economic Cooperation—for political, military, or other reasons. Notwithstanding the most-favored-nation clauses in the agreements establishing the WTO, the organization does allow such preferential integration under certain conditions. Even though many such integration agreements arguably do not involve “substantially all trade”—the WTO’s main condition—there has been little conflict over the formation of free-trade areas and customs unions. The most common omissions from such agreements are politically sensitive sectors such as agriculture.

Beginning in the late 1990s, the WTO was the target of fierce criticism. Opponents of economic globalization (anti-globalization), and in particular those opposed to the growing power of

multinational corporations, argued that the WTO infringes upon national sovereignty and promotes the interests of large corporations at the expense of smaller local firms struggling to cope with import competition. Environmental and labor groups (especially those from wealthier

countries) have claimed that trade liberalization leads to environmental damage and harms the interests of low-skilled unionized workers. Protests by these and other groups at WTO ministerial meetings—such as the 1999 demonstrations in Seattle, Washington, U.S., which involved approximately 50,000 people—became larger and more frequent, in part because the development of the Internet and social media made large-scale organizing and collective action easier. In response to such criticism, supporters of the WTO claimed that regulating trade is not an efficient way to protect the environment and labor rights. Meanwhile, some WTO members, especially developing countries, resisted attempts to adopt rules that would allow for sanctions against countries that failed to meet strict environmental and labor standards, arguing that they would amount to veiled protectionism.

Conclusion

On the off chance that globalization lead for and guarantees ‘free and reasonable’ exchange among nations, it is well and great, however, the accentuation so far has been on ‘free’ as opposed to ‘reasonable’ exchange. It is in this setting the rich and modernly propelled nations have a part to play. While requiring creating nations to disassemble hindrances and join the standard of universal exchange, they have been raising huge duty and non-tax boundaries on exchange from creating nations. Along these lines, it is vital that if the rich nations need an exchanging framework that is genuinely reasonable, they ought to individually lift the exchange obstructions and appropriations that keep the results of creating nations from achieving their business sectors. It must be valued that there are some dim sides of WTO. Many immature nations have criticized the working of WTO as pointless and costly publicity for global exchange. Its work has been denounced on the ground that the WTO is a method for created countries to take part in exchange wars and to have constrained sections in immature nations. Regardless of whether the WTO is in any capacity monetarily advantageous to the immature districts has dependably been a hostile issue, the reality remains that it is one association at the worldwide level that has given free or less limited exchanging products, administrations, innovation, and capital among different nations. There are two certainties that should stay: First, Governments, with or without national help will probably keep on supporting the WTO, and secondly to achieve globalization time is required.

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