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World Trade Organisation Essay

Essay by   •  April 20, 2016  •  Research Paper  •  4,694 Words (19 Pages)  •  1,002 Views

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Introduction

The World Trade Organisation (WTO) is an international organisation that regulates global trade. It was formed in 1995, during the Marrakech Agreement of the General Agreement on Tariffs and Trade (GATT) and aims to create a global trading system where trade flows as smoothly, predictably and freely as possible.  It is driven by its member states as well as the WTO Secretariat, to ensure that international trading rules are correctly applied and enforced.

Since its inception, the WTO has been viewed as a supporter and promoter of free trade, due to its policies to reduce trade barriers. Here, free trade is defined as a “general openness to exchange goods and information between and among nations with few-to-no-barriers-to-trade”. However, this has led to developed countries often benefitting from higher trade volumes, at the expense of developing/least-developed countries, due to their increased bargaining power and resource capabilities. This has contributed to the increasingly popular perception of the WTO being an organisation that promotes free trade in place of fair trade. Fair trade in this situation is defined as “a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade, contributing to sustainable development by offering better trading conditions to, and securing the rights of, marginalised producers and workers – especially in the South.” With a rising consumer interest in fair trade and products and services derived from ethical and sustainable practices, the relevance of the WTO’s promotion of free trade is called into question.

This paper shall thus evaluate the view that the WTO promotes ‘free trade’ but not ‘fair trade’, by analysing the expected benefits of the WTO to both developed and developing/least-developed nations and whether these benefits have been achieved. Based on this analysis, it will be assessing the role of the WTO as a promoter of free trade and fair trade, to ascertain which of these is more relevant in today’s world. Finally, it will be providing recommendations as to how the WTO can change its policies to maintain its relevance in an ever-changing global trade landscape.

The WTO and its Expected Benefits

General Benefits for Both Developed and Developing Nations

  1. Increased Trade

Expectation
Membership in the WTO was expected to increase trade opportunities for countries, through the globalisation of markets leading to greater access to markets. This was to be achieved through the lowering of trade barriers such as tariffs and import quotas. This was also to be achieved through the process of tariffication whereby non-tariff barriers were required to be converted to tariffs, which would then be reduced over the years. In addition, joining the WTO as a member meant that a nation automatically received the Most Favoured Nation status, requiring other members to treat said nation equally as it would all other nations, with no preferential trade for any one country over another.

Reality
Within the first 10 years of its start, the WTO has achieved increased trade volumes globally, with trade between member countries increasing by as much as 23% and non-member countries, about 13%.  Additionally, the
WTO has had an enormous effect on member countries — world imports were higher in those countries by roughly 120 per cent, or about $8 trillion dollars in 2000 alone, thanks to its provisions.


However, closer examination of the situation reveals that
 the WTO boosts trade more for rich countries than for poor countries. This may be a result of the principle of ‘special and differential treatment’ (SDT), during the times of the GATT, where developing countries were given a free pass, since there were seen as unable to significantly reduce their trade barriers. Their inability to lower their trade barriers caused a much lower effect on their trade volume. On the other hand, for developing countries that joined the WTO much later, the ascension criteria were tightened and so, they had to implement more reforms in order to speed up their ascension process. These reforms helped to reduce trade barriers, allowing these nations to see faster growth in their international trading volume.

Analysis

Utilising the definition of fair trade, it is thus evident that the increase in international trade has not been equitable, as the liberalisation of markets has increased trade for developed countries more than it has for developing/least-developed countries, showing that it is not engaging its member nations in fair trade as much as it is in free trade.

  1. More Effective Means of Handling Disputes

Expectation

The WTO also provides policing and enforcement mechanisms, via the Dispute Settlement Body (DSB), to ensure that disputes between nations are handled effectively and peacefully. The DSB has the authority to appoint “panels” of experts to consider a dispute case, and to accept or reject these panels’ findings or the results of an appeal. This was meant to result in fair and just outcomes in the case of a dispute.

Further, considering the fact that developed countries have more resources to deal with disputes, in contrast to developing/least-developed nations due to various internal constraints, the WTO established the Advisory Centre on WTO Law (ACWL). The legal experts of this centre provide legal support to developing/least-developed countries, on any disputes in the dispute settlement body of the WTO at only 10 per cent of the full cost. This is expected to maintain fairness in the dispute-handling process.

Reality

The DSB and ACWL have greatly aided member countries, in having their voices heard when problems arise, especially for developing countries. For example, Venezuela and Brazil lodged complaints against the United States in 1995, for applying rules that discriminated against gasoline imports. The DSB mediated the case via the panel, resulting in the US agreeing with the complainants to amend its regulations and then doing so within 2 years of the complaint.

This presence of the ACWL may have also have contributed to greater participation from developing countries in disputes. Looking at Table 1, prima facie, it may appear that developed countries lodge more complaints that developing countries, with 204 by developed countries and 125 by developing countries. However, an overall global picture in which about 130 formal complaints initiated by about 35 developing countries (39% of all complaints are by developing countries) suggests that their ability to participate in the system has not been a major problem. In addition, in the context of Appellate Body procedures, out of 99 appearances by WTO members before the Appellate Body in 2005, 62 were by developing nations, demonstrating their high level of confidence in their ability to challenge and succeed, even against more powerful developed nations.

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