World Trade Organization Today - Essay Example

World Trade Organization Introduction The World Trade Organization (WTO) is the one and only international organization dealing with multilaterally agreed rules on trade among its member countries. Through WTO agreement, which spell out rights and obligations, member countries operate a nondiscriminatory multilateral trading system that has allowed world trade to grow. The goal is to help producers of goods and services, and exporters and importers, conduct their business in a manner that ensures predictability and stability. (World Trade Organization, 320) This paper is intended to provide an understanding of the WTO system and its implications to government policies and international business. (World Trade Organization, 323) The Origin, Role and Functions of the WTO The WTO was established on 1 January 1995. The WTOs headquarters are in Geneva, Switzerland. It currently has 144 members. The WTO replaced the General Agreement on Tariffs and Trade (GATT) following the conclusion of the Uruguay Round of trade negotiations in 1994. The WTO is an international organization that administers multilateral agreements pertaining to trade in goods (GATT), trade in services (GATS), and trade related aspects of intellectual property rights (TRIPs). (Hoekman & Kostecki, 26) The supreme body of the WTO is the Ministerial Conference which is held at least once in every two years. It comprises representatives of all members and functions to oversee the implementation of members obligations as well as to negotiate new agreements. The day-to-day business of the WTO is conducted under the supervision of the General Council (GC) which comprises representatives of all members to the WTO who are usually of Ambassadorial level or equivalent. The GC has the authority to act on behalf of the Ministerial Conference and oversees the operations of agreements and ministerial decisions. (Hoekman & Kostecki, 29) As the principal institution with responsibility for the multilateral trading system, the WTO has the same status as institutions such as the World Bank and IMF. The WTO has legal personality and has been accorded privileges similar to those accorded to the specialized UN agencies. The WTO is charged with providing the common institutional framework and associated legal instruments for the conduct of trade relations among its Members in matters related to the Agreement. (MacLachlan, 2) The WTO has five functions. It is charged with facilitating the implementation and operation of the Multilateral Trade Agreements; providing a forum for negotiations on already covered or new issues; administering the understanding on dispute settlement and the Trade Policy Review Mechanism (TRPM); and, finally, co-operating with the World Bank and the IMF to achieve greater coherence in global economic policy-making. (Hoekman & Kostecki, 31) The Effects of Globalization Financial markets are almost fully globalized and are largely operated by electronic devices. The combination of cheap, easy communications and massive stocks of short-term capital has made these markets international and volatile, responding to every expectation of future movements in interest and exchange rates. (Dunning, 79) Many service industries are globalizing. Accounting firm and legal firms were early movers in this development. Since then, the ability to communicate instantly around the world has allowed many service activities to relocate. The information and communication technology revolution has made it possible for many service firms in developed nations to provide services to other countries in a wide range of activities including architecture, education, factory and product design and management consultancies. Services are already close to a third of total exports in several industrialized countries, and rising. (Dunning, 80) Many corporations are regionalizing, developing presence across Europe, or North Americas, or the Asia Pacific, with some presence outside their own areas. More and more corporations are globalizing and are increasingly coordinating their production and trading activities within a network of cross-border, internal and external relationships which serve their global strategic interests. (Dunning, 80) The World Trade Organization is an international, multilateral organization setting policies for the global trading system. It settles trade disputes between its member states – one hundred and forty nine in number – and is a successor to the General Agreement on Tariffs and Trade, which was dissolved in the year 1995 to give birth to the World Trade Organization in its stead All of the principles and agreements of the General Agreement on Tariffs and Trade were adopted by the new organization, which added approximately thirty more to them. The new organization stated that its mission is to increase international trade by promoting lower trade barriers. World Trade Organization is also a platform for the negotiation of trade (World Trade Organization, 333). One of the fundamental principles of trading around which the World Trade Organization discussions revolve is that a trading system ought to be more accommodating for poor nations by give them further time to adjust, greater suppleness, and more privileges. An open market system is advocated, while it is stressed that a trade system should be free of discrimination. The World Trade Organization is thus a powerful ally for the poor and less developed countries against exploitation from rich and developed nations as well as powerful companies. Some have argued that the World Trade Organization simply serves the interests of the United States and the European Union. Contrary to their opinion, the organization plays a crucial role in controlling a ravenous quest for profits on the part of rich nations and companies (Lipsey, 16). Trade and Tariffs The WTO allows members to determine their own tariff rates for all types of products within the jurisdiction of their national policies. Members can impose tariffs and make amendments to them in accordance with their respective national policies. (World Trade Organization, 337 ) In the WTO however, members have agreed, through successive negotiations, to bind tariffs at particular levels. In respect of products covered under the binding commitments, members can only raise tariffs up to the bound levels. For products not included in the bound schedule, there is no upper limit set for tariff that may be imposed. Members can also raise the tariff above the bound rate if they can offer compensatory concession in some other items. (Oberthür ,15) Trade and Competition The objective of the trade and competition policy is to have markets that are, to as great an extent as possible, competitive. Competitive markets mean markets where resources are allocated efficiently in the economy and national welfare is maximized. Consumers pay an optimal price for goods and services (equal to the resources used to make them) because sellers must compete with each other in order for their product to be attractive. (World Trade Organization, 338) All countries have an interest in implementing competition policies. As barriers to trade are reduced, the gains from liberalization may be thwarted by anti-competitive practices. Effective competition policies help to ensure that these benefits flow through to all citizens. Trade competition policy can also help governments overcome domestic opposition to the implementation of pro-competitive policies, for example, in preventing regulatory measures that favor certain firms over others. (World Trade Organization, 340) Trade and Facilitation Proposals for negotiations in rules on trade facilitation are aimed at overcoming the barriers that still exist in moving goods across borders. Trader from both developing and developed countries have raised concerns that import and export procedures and requirements often lack transparency and vast duplication occurs in many places. Discussion on trade facilitation is aimed at establishing cooperation between traders and official agencies including through a harmonial system for clearance of goods and simplification of trade procedures. (World Trade Organization 2001) Trade and Investment WTO members have been discussing the relationship between trade and investment, and its inferences on economic development and progress. WTO members have observed a range of global investment instruments and offered agreements, and have debated on the possibility of a multilateral framework of investment rules in the WTO. The issues examined include scope and definition of investment, transparency, non-discrimination, settlement of disputes and balance of payment safeguard. There is no consensus however to begin negotiations on a WTO agreement on investment rules. (World Trade Organization 2001) Works Cited Hoekman, B.M. and M.M. Kostecki, 1995, The Political Economy of the World Trading System. The WTO and Beyond. Oxford University Press, p25-35. Dunning J.H. (ed.) (1999), Governments, Globalization and International Business, Oxford University Press, Oxford, p79-81. Lipsey, Richard G. (2006). Don’t Give Up On WTO: Fix It. YaleGlobal. P14-17 Oberthür, Sebastian; Gehring, Thomas, (2006). Institutional Interaction in Global Environmental Governance: The Case of the World Trade Organization. Global Environmental Politics, p1-31 MacLachlan, Suzanne; McLaughlin, Abraham. (1995). The World Trade Organization. Christian Science Monitor, p2 World Trade Organization (WTO). (2004). World Almanac & Book of Facts, p319-340 Read More