World Trade Organizations regulatory regime - Essay Example

World Trade Organization’s regulatory regime The World Trade Organization was established in 1995 as a descendent of the GATT Agreement signed back in 1945 to ease down the trading relations between nations around the world. The GATT Agreement actually was founded with the commencement of the Bretton-Woods Commission in 1945 post the World War II. After the termination of the war, it was spotted that almost all nations around the world were running short of resources as well as the supply of goods necessary for a healthy survival. People who were unaffected by war, were found to be suffering from other menaces typical of war-afflicted regions. Poverty and hunger hovered around almost every nook and corner of the world, accompanied by widespread inflation. The adversities were multiplied due to an absence of free trade among nations. In such a restricted trade scenario, the domestic governments of all nations wanted to protect their own production units that were already passing through the aftermath of a world war, and thus discouraged international trade. But it was realised that free trade was the only conceivable weapon that could eradicate all the vices of the war. However, the adoption of such a step needed cooperation from a large number of domestic governments which was impossible unless an organization came forward to bring them under the same roof or a totally new organisation was formed with the consent of all the major nations around the world. This was when the GATT Agreement was signed with just 23 nations agreeing to it. Later however, in 2003, the number of member nations of the WTO rose to 146. The WTO is an institutionalised form of the GATT Agreement that provides its members with a forum where to make trade negotiations and solve trade disputes. The former is different from the GATT in the sense that the former though supports and monitors the proper implementation of all the policies and regulations set by its predecessor, their agreements cover avenues for further simplification of all those policies and hence ensuring a greater tradability of commodities across international premises. Besides, the forum also looks after the causes which create better grounds for trade (Crowley, 2003)1. Product Standards and Safety Regime of the WTO There had already been provisions for the maintenance of safety standards of traded commodities in the GATT Agreement. Article 20 of the GATT Agreement specified the liberty of the domestic governments to protect their nations against any malpractices prevalent in sphere of international trade. Moreover, an additional article, Sanitary and Phytosanitary Measures Agreement, abbreviated as SPS, also raises concerns for safety of food and that of the health of animals and plants. The main purpose of such rules is to ensure product safety and good quality of the produce. The organisation allows the nations to frame their regulations, backed by scientific logics, in line with their own political and economical setups. For instance, the WTO has increased its activities for the incorporation of biotechnology in agriculture for product markets around the world to extract the highest possible gains from investing in agriculture. In addition, the inclusion of technology also assures full-fledged nutrition, reaping greater quantity of output, product and food safety, environmental protection. These measures are becoming more and more important with the gradual alleviation of tariffs and taxes on imported goods from the international trade scenario. One point that can actually be treated as a corollary of the maintenance for product safety standards is to look after the well-being of the producers of the commodities or products. One such way is through the promotion of Fair Trade farms and of commodities which follow rules of voluntary or ethical labelling (Centad, 2003)2. Fair Trade Farms It has often been found that the people, who toil throughout the day in order to bring food to our tables, are unable to provide for two square meals a day to their own children. This trend is especially noticeable among the farmers who are compelled to work hard amidst all adversities to meet their both ends meet. This innate hunger and poverty might discourage the farmers or other such producers from producing premium quality products that subsequently might lead to a deterioration of the health standards of the consumers. The solution to any problem could be found in the roots of that problem and thus a number of researches were carried out in this regard. Gradually the fact came to light that the farmers were actually very poorly paid which made it very difficult for them even to sustain their lives – the problem was especially acute in developing nations. This was reflected in the quality as well as quantity of the products, none of which were found to be potentially saturated in nature. This was hampering their position in the international market, killing their prospects to earn more and thus push the nations towards a trial of development. Since the World Trade Organisation aimed towards attaining a free trade environment without any trace of a constraint, it was important to assure that the producers were fairly treated so that no obstructions came in their path of development and growth. Hence, the concept of fair trade farms came into being to ensure that the small-scale and marginal farmers in less developed nations in the world are able to sustain themselves in a proper way. Fair trade farms have the following characteristics – Ensuring safe working conditions, reasonable wages for the farmers and restrictions towards child labour. The fair trade system helps the local goods to be sold in the international sphere so that the local producers can compete in the international arena thus encouraging them to produce better quality products. Fair trade system guarantees that the farmers get a minimum fixed price for their produce. This price is set keeping in mind the efficiency and the labour that the farmers put into their farmlands. A fair trade system ensures that the farmers are able to invest in quality production and are in a position to take care of activities necessary to ensure and sustain a decent lifestyle. Finally, fair trade farms adopt farming systems compatible with the ecosystem so that the future generation of farmlands remain unaffected. In case of commodities that are traded fairly, a logo is tagged with ‘Fair Trade Certified’ written on it for the convenience of the consumers who often prefer to buy commodities whose producers have undergone a fair treatment compared to those that go anonymous about the ethical grounds underlying the production process (Discover Fair Trade, 2007)3. Coffee and cocoa happen to be two such fairly traded commodities. With their production mainly concentrated in the equatorial belt of the world, coffee and cocoa happen to be two major traded items for some of the world’s most impoverished nations like Ethiopia, Ghana and many other African nations as well as some Latin American nations. It is after keeping their development in mind that the WTO encouraged concepts like that of fair trade. Voluntary or Ethical Labelling of Commodities There is an increasing interest among consumers about the way that their consumer basket is filled up. They are becoming more and more enthusiastic with commodities that are in fact traded fairly and hence have a suitable social and economic background. It has been found that the consumers all over the world, especially those residing in the developed and technologically advanced nations of the world are opting to choose those goods from the racks which meet the ethical standards and norms of good environmental standards and those which provide extra benefits to the producers. This growing concern is directed towards the upliftment of the producers in the developing nations of the world. This response from the consumers has also led the institutions who deal with the procurement and distribution of such items to ensure that proper employment standards are maintained while production of those items. Source: Caldwell & Bacon (c. 2005) ‘Fair Trade's Future: Scaling Up Without Selling Out?’ The above diagram shows how much the total amount of retail sales of fairly traded goods vary among nations. The diagram is also suggestive of the fact that the popularity of fairly traded items among consumers depends upon the extent by which the particular nation is advanced and developed. Since the promotion of such commodities would require the consumers to shed out proportionately higher amount of cash from their pockets, it might not be possible for the residents of less developed nations to comply with the behaviour displayed by their counterparts in the advanced nations of the world. But with the nationals in the developed nations complying with such measures leading to an appreciation of the economic conditions of the people worldwide, it is quite obvious that there will be a trickle-down effect on their counterparts living in the LDCs so that gradually they too will be in a position to choose their commodities based on humanitarian grounds rather than cost effectiveness (Trans Atlantic Consumer Dialog, 2000)4. Ensuring Product Safety As mentioned before, since most of the agricultural and farm products come from the less developed nations of the world, there is a high tendency of the producers of such commodities to be highly exploited in terms of wages. This is the reason why the World Trade Organisation employs certain rules and regulations to ensure that such products being traded meet the standards of fair trading norms and follow the system of ethical labelling so as to identify them among a rack full of commodities. Some of the steps that the WTO takes in this regard are – Allow the importing nations to adopt their own standards in line with the product and farm safety standards. They are permitted to choose their own methodologies of restrictions and regulations according to the political, social or economic conditions prevailing in the individual nations in case that they find it difficult or problematic to comply with the methodologies specified by the WTO Agreements. The member nations however, cannot obstruct the free imports of commodities within the country unless they are justified on scientific grounds. This step is taken to guard the exporting nations from being the victims of protectionist policies of the importing economies. However according to Article 5.7, the latter can also adopt such strategies temporarily, even when they are not backed by scientific logic, such as under circumstances when the importing nations fear against some risks. The agreement of the WTO also makes provisions for the importing nations to implement various inspection methods on goods of countries interested to export them to the nation. Only after they are found to comply with the Sanitary and Phytosanitary regulations issued by the national government of the importing country, are such goods allowed to enter the premises of the nation. In cases that the importing nation expresses doubt or are dubious about the quality of the exported items, they can express their concerns through voicing out their protests against them. In such cases, the exporting nations are bound to explain the processes that the commodity underwent before it was packed and parcelled. However, in addition to the SPS regulations, there are also the Technical Barriers to Trade Agreement (TBT) that ensures that the importing nations do not keep on implementing the restrictions without any proper base since that might even mean that those nations are applying protectionist strategies in disguise. But even in the latter agreement, there are provisions for the importing nations to consider the standards of the exported goods, since these are important for the maintenance of the health standards of the human, animal, plant life as well as for the purpose of environmental protection of the importing nation. Thus, it is important to support the system of fair trade and that of ethical labelling by the importing nations and this is the reason why it is necessary to follow some regulations that are specified in the norms set by the Technical Barriers to Trade (TBT) are – The WTO has specified the formulation of governmental, non-governmental or some industrial body in order to set out standard codes that would define a firm’s safety standards by rewarding them with their trademark codes. At present there are 200 such voluntary standard-setting institutions all over the world. The standards that apply to the production of a commodity must be uniform for domestically produced commodities as well as for imported goods. In fact it must be guaranteed that the domestic goods are not given some extra advantage on account of being protective towards domestically produced commodities. The importing country however, should be concerned about the methods that the commodity needs to undergo in order to get produced. Hence, its standards for choosing a commodity and making it available in the market must conform not only with the procedures which are a must, but also to the infrastructure available in the exporting nation to produce the same. There must be provisions for the managers to know the currently modified standards prevalent in the importing nation. In order to ensure the managers are correctly informed, it is mandatory for the national governments of the member nations to establish their individual national enquiry points that help the other nations to stay up to date with the proceedings in the former in this regard (World Trade Organisation, n.d.)5. Conclusion The World Trade Organisation was established with the objective of ensuring a free trade global environment and the eradication of all the domestic constraints prevailing in a member nation. But this system must also conform to the norms of product and food safety so as to protect the health standards of the importing nation. Hence, besides its primary task of looking after the international trade aspect, the WTO is also responsible for the monitoring and implementation of proper food and safety norms in the member nations. Besides, there is also another dimension that the WTO adopts to ensure that the producers of such commodities are not deprived in the process. One way to guarantee this is through the implementation of the fair trading system and the scheme of voluntary labelling, specified in Article 20 of the GATT Agreement. The fair trading system not only certifies that the producers are properly treated and given a fair price for the labour and efficiency that they put into their work, but also that the quality of goods being produced are premium in nature. The ethical labelling scheme is a voluntary act of justice aimed towards the betterment of the producers. The commodities that are fairly traded have a logo attached to them in order to help the customers identify them amidst a rack full of other substitute commodities. This move is meant for the benefit of those customers interested in purchasing such commodities and thus encouraging their trade. Besides there is also the Technical Barriers to Trade Agreement that guarantees that the nations cannot be compelled to import the commodities that go against the product safety norms specified domestically by them or they find are produced in an ethically disturbing manner. References Centre for Trade and Development (2003). ‘How is the WTO different from GATT?’ [Online] Available at http://www.centad.org/relatedinfo1_1.asp# (Accessed: 26 November, 2009) Crowley, M. A. (2003). ‘An introduction to the WTO and GATT’ [Online] Available at http://www.unitar.org/ny/sites/default/files/Prusa%20Background%20Article.pdf (Accessed: 26 November, 2009) Trans Atlantic Consumer Dialog (February 7, 2000). ‘Ethical Labeling’ [Online] Available at http://tacd.org/index2.php?option=com_docman&task=doc_view&gid=126&Itemid (Accessed: 26 November, 2009) TransFair USA (January 26, 2007). ‘Discover Fair Trade’ [Online] Available at http://www.discoverfairtrade.org/ (Accessed: 26 November, 2009) World Trade Organisation (n.d.). ‘Standards and safety: Food, animal and plant products: how safe is safe?’ [Online] Available at http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm4_e.htm (Accessed: 26 November, 2009) Bibliography Rees, N. & Watson, D. (2000) International Standards for Food Safety. Maryland: Aspen Publications. Trebilcock, M. J. & Howse, R. (1999) The regulation of international trade (2nd Edition). London: Routledge. Wallach, L. & Sforza, M. (1999) The WTO: five years of reasons to resist corporate globalization. Canada: Seven Stories Press. Read More