WORLD TRADE ORGANISATION

WORLD TRADE ORGANISATION

 

CONTEXT

  • Nigeria’s Ngozi Okonjo-Iweala was appointed as Director-General of the World Trade Organisation (WTO), the leading international trade body. Ngozi Okonjo-Iweala is the first African official and the first woman to hold the position.

BACK TO BASICS

  • The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade between nations
  • 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.
  • The WTO facilitates trade in goods, services and intellectual property among participating countries by providing a framework for negotiating trade agreements, which usually aim to reduce or eliminate tariffs, quotas, and other restrictions; these agreements are signed by representatives of member governments.
  • The WTO also administers independent dispute resolution for enforcing participants’ adherence to trade agreements and resolving trade-related disputes.
  • The organization prohibits discrimination between trading partners, but provides exceptions for environmental protection, national security, and other important goals.
  • Its top decision making body is the Ministerial Conference, which is composed of all member states and usually convenes biannually; consensus is emphasized in all decisions.

DOHA ROUND (DOHA AGENDA): 2001–PRESENT

  • The WTO launched the current round of negotiations, the Doha Development Round, at the fourth ministerial conference in Doha, Qatar in November 2001.
  • This was to be an ambitious effort to make globalization more inclusive and help the world’s poor, particularly by slashing barriers and subsidies in farming.
  • he initial agenda comprised both further trade liberalization and new rule-making, underpinned by commitments to strengthen substantial assistance to developing countries.
  • Progress stalled over differences between developed nations and the major developing countries on issues such as industrial tariffs and non-tariff barriers to trade particularly against and between the EU and the US over their maintenance of agricultural subsidies—seen to operate effectively as trade barriers.

PRINCIPLES OF THE TRADING SYSTEM

  • Non-discrimination – It has two major components: the most favored nation (MFN) rule and the national treatment policy
  • Reciprocity – It reflects both a desire to limit the scope of free-riding that may arise because of the MFN rule and a desire to obtain better access to foreign markets.
  • Binding and enforceable commitments – The tariff commitments made by WTO members in multilateral trade negotiation and on accession are enumerated in a schedule (list) of concessions.
  • Transparency – The WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of administrative decisions affecting trade, to respond to requests for information by other members, and to notify changes in trade policies to the WTO.
  • Safety values – In specific circumstances, governments are able to restrict trade. The WTO’s agreements permit members to take measures to protect not only the environment but also public health, animal health and plant health.

 

Achievements of WTO

  • Global Facilitation of Trade – By building binding rules for global trade in goods and services, WTO has facilitated dramatic growth in cross-border business activity.The WTO has not only enhanced the value and quantity of trade but has also helped in eradicating trade and non-trade barriers.
  • Improved Economic Growth – Since 1995, the value of world trade has nearly quadrupled, while the real volume of world trade has expanded by 2.7 times. Domestic reforms and market-opening commitments have resulted in the lasting boost to national income of nations.
  • Increased Global Value Chains – The predictable market conditions fostered by the WTO, have combined with improved communications to enable the rise of global value chains, trade within these value chains today accounts for almost 70% of total merchandise trade.
  • Upliftment of Poor Countries – The least-developed countries receive extra attention in the WTO. All the WTO agreements recognize that they must benefit from the greatest possible flexibility, and better-off members must make extra efforts to lower import barriers on least-developed countries’ exports.

CHALLENGES TO WTO

  • Rich countries are able to maintain high import duties and quotas in certain products, blocking imports from developing countries (e.g., clothing);
  • According to statements made at United Nations Conference on Trade and Development (UNCTAD, 2005), the use of NTBs (non-tariff barriers), based on the amount and control of price levels has decreased significantly from 45% in 1994 to 15% in 2004, while use of other NTBs increased from 55% in 1994 to 85% in 2004, such as anti-dumping measures allowed against developing countries;
  • The maintenance of high protection of agriculture in developed countries, while developing ones are pressed to open their markets;
  • Many developing countries do not have the capacity to follow the negotiations and participate actively in the Doha Round; and
  • The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) agreement, which limits developing countries from utilizing some technology that originates from abroad in their local systems (including medicines and agricultural products).
  • The WTO is also destroying the Environment to a great extent – The organization is being used by corporations to dismantle national environmental protections, which are attacked as “barriers to trade.”
  • Free trade is not working for the majority of the world – During the most recent period of rapid growth in global trade and investment, inequality worsened both internationally and within countries. WTO rules have hastened these trends by opening up countries to foreign investment and thereby making it easier for production to go where the labor is cheapest and most easily exploited and environmental costs are low .
  • WTO takes too long to arbitrate and settle disputes – it can take over five years from the initial receipt of a complaint from one member to the final panel ruling. Despite the WTO operating as a multilateral organisation, many member countries and trading blocs favour bilateral discussions with partners or competitors
  • Growth and the rate of poverty reduction have slowed in most parts of the world since implementation of the WTO’s policies imposed on many developing countries by the International Monetary Fund and World Bank.
  • Lack of Transparency –  There is a problem in WTO negotiations as there is no agreed definition of what constitutes a developed or developing country at the WTO. Members can currently self-designate as developing countries to receive ‘special and differential treatment’ – a practice that is the subject of much contention.
  • E-commerce & Digital Trade-  While the global trade landscape has changed significantly over the past 25 years, WTO rules have not kept pace. In 1998, realizing that e-commerce would play a growing role in the global economy, WTO members established a WTO e-commerce moratorium to examine all trade-related issues relating to global electronic commerce.
    • Recently, however, the moratorium has been called into question by developing countries because of its implications for collecting revenue.
  • Agriculture and Development- Agreement on agriculture is facing issues due to food security and development requirements for developing countries like India.

WAY FORWARD

  • Modernizing the WTO will necessitate the development of a new set of rules for dealing with digital trade and e-commerce.
  • WTO members will also have to deal more effectively with China’s trade policies and practices, including how to better handle state-owned enterprises and industrial subsidies.
  • Given the pressing issues around climate change, increased efforts to align trade and environmental sustainability could help to both tackle climate change and reinvigorate the WTO.

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