WTO: Objectives and Role in international trade

History and Establishment

• Background: During the Great Depression of the 1930s, international trade suffered greatly, leading many countries to impose import restrictions to protect their economies. This resulted in a decline in global trade. In 1947, the United States initiated efforts to expand international trade and employment.
• General Agreement on Tariffs and Trade (GATT):
  • Establishment: Signed on October 30, 1947, by 23 countries in Geneva.
  • Purpose: GATT aimed to reduce tariffs and promote trade liberalization globally.
  • Evolution: Initially intended as a temporary arrangement, GATT evolved into a permanent agreement overseeing international trade rules.
• Transformation into WTO:
  • Establishment: The WTO officially replaced GATT on January 1, 1995.
  • Purpose: The WTO was designed to build upon GATT's framework and expand its scope to include services and intellectual property, among other areas.
  • Membership: Started with 76 founding members and has since grown to include 164 members as of 2022.

Functions and Responsibilities

• Facilitation of Trade Agreements:
  • The WTO provides a platform for negotiations among member countries to establish multilateral trade agreements. These agreements cover various aspects of international trade, including tariffs, non-tariff barriers, and trade-related aspects of intellectual property rights (TRIPs).
• Dispute Settlement Mechanism:
  • The WTO administers the Dispute Settlement Understanding (DSU), which is a central mechanism for resolving disputes between member countries regarding trade issues. It offers a structured process for consultations, panels, and appellate reviews to settle disputes.
• Trade Policy Review Mechanism:
  • The Trade Policy Review Mechanism (TPRM) ensures transparency and accountability in member countries' trade policies. It involves regular peer reviews of each member's trade policies and practices, contributing to a better understanding of global trade practices.
• Cooperation with International Organizations:
  • The WTO collaborates with other international organizations such as the International Monetary Fund (IMF), World Bank (IBRD), and World Health Organization (WHO) to ensure coherence in global economic policy-making. This cooperation helps align trade policies with broader economic goals and development objectives.
• Councils and Committees:
  • The WTO operates through several councils and committees that focus on specific trade areas:
    • Goods Council: Deals with trade in goods and monitors the implementation of trade agreements related to tariffs and non-tariff measures.
    • Services Council: Addresses trade in services and oversees agreements under the General Agreement on Trade in Services (GATS).
    • TRIPs Council: Manages issues related to trade-related aspects of intellectual property rights, ensuring member compliance with TRIPs agreements.

Role in Global Trade

• Promotion of Open and Fair Trade:
  • The WTO promotes open and fair trade practices globally by reducing barriers, ensuring non-discriminatory treatment of member countries, and facilitating dispute resolution through established rules and procedures.
• Economic Development and Stability:
  • By promoting trade liberalization and adherence to transparent trade rules, the WTO contributes to economic development, job creation, and stability in member countries and globally.
• Challenges and Criticisms:
  • The WTO faces challenges such as addressing the needs of developing countries, managing trade tensions among major economies, and addressing concerns about environmental and social impacts of global trade policies.
• Future Directions:
  • The WTO continues to evolve in response to changing global economic dynamics, technological advancements, and geopolitical shifts. Future priorities include updating trade rules to address digital trade, sustainability challenges, and emerging trade barriers.

In summary, the WTO plays a crucial role in fostering international trade relations, ensuring rule-based trade practices, and resolving disputes among member countries. It serves as a forum for negotiating trade agreements, monitoring compliance, and promoting global economic stability and development.