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Trends in World Trade

Trends in World Trade

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Published by Rutvik Pandit
An Introduction on WTO and an analysis on World Trade Trends
An Introduction on WTO and an analysis on World Trade Trends

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Published by: Rutvik Pandit on Sep 18, 2012
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1
.
World Trade Organization:
 
The
World Trade Organization
(
WTO
) is an organization that intends to supervise andliberalize international trade. The organization officially commenced on January 1, 1995 underthe Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT),which commenced in 1948. The organization deals with regulation of trade between participatingcountries; it provides a framework for negotiating and formalizing trade agreements, and adispute resolution process aimed at enforcing participants' adherence to WTO agreements whichare signed by representatives of member governments and ratified by their parliaments. Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from theUruguay Round (1986
 – 
1994).The organization is attempting to complete negotiations on the Doha Development Round, whichwas launched in 2001 with an explicit focus on addressing the needs of developing countries. Asof June 2012, the future of the Doha Round remains uncertain: The work programme lists 21subjects in which the original deadline of 1 January 2005 was missed (So was the next unofficialtarget of the end of 2006. The further imposition of free trade on industrial goods and servicesand the protectionism on farm subsidies to domestic agricultural sector requested from thedeveloped countries, and the substantiation of the international liberalization of fair trade onagricultural products from developing countries remain the major obstacles. These points of 
 
2
contention have hindered any progress to launch new WTO negotiation(s) beyond the DohaDevelopment Round. As a result of this impasse, there has been an increasing amount of bilateralfree trade agreementsWTO's current Director-General is Pascal Lamy, who leads a staff of over 600 people in Geneva,Switzerland. The WTO establishes a framework for trade policies; it does not define or specifyoutcomes. That is, it is concerned with setting the rules of the trade policy games.The
Official Website for World Trade Organization
 
defines WTO as ―There are a number of 
ways of looking at the World Trade Organization. It is an organization for trade opening. It is aforum for governments to negotiate trade agreements. It is a place for them to settle tradedisputes. It operates a system of trade rules. Essentially, the WTO is a place where member
governments try to sort out the trade problems they face with each other‖
.
 
The resultisassurance. Consumers and producers know that they can enjoy secure supplies and greater choiceof the finished products, components, raw materials and services that they use. Producers andexporters know that foreign markets will remain open to them.The result is also a more prosperous, peaceful and accountable economic world. Virtually alldecisions in the WTO are taken by consensus among all member countries and they are ratifiedby members' parliaments. Trade friction is channeled into the WTO's dispute settlement processwhere the focus is on interpreting agreements and commitments, and how to ensure thatcountries' trade policies conform with them. That way, the risk of disputes spilling over intopolitical or military conflict is reduced.
By lowering trade barriers, the WTO‘s system also breaks down other barriers between peoples
and nations.At the heart of the system
 — 
known as the multilateral trading system
 — 
 
are the WTO‘sagreements, negotiated and signed by a large majority of the world‘s trading nations, and ratified
 
3
in their parliaments. These agreements are the legal ground-rules for international commerce.Essentially, they are contracts, guaranteeing member countries important trade rights. They also
 bind governments to keep their trade policies within agreed limits to everybody‘s benefit.
 The agreements were negotiated and signed by governments. But their purpose is to helpproducers of goods and services, exporters, and importers conduct their business.
The goal
 is to improve the welfare of the peoples of the member countries
Principles of the trading system:
The WTO establishes a framework for trade policies; it does not define or specify outcomes.That is, it is concerned with setting the rules of the trade policy games. Five principles are of particular importance in understanding both the pre-1994 GATT and the WTO:
1.
 
Non-discrimination
. It has two major components: the most favored nation (MFN) rule, and thenational treatment policy. Both are embedded in the main WTO rules on goods, services, andintellectual property, but their precise scope and nature differ across these areas. The MFN rulerequires that a WTO member must apply the same conditions on all trade with other WTOmembers, i.e. a WTO member has to grant the most favorable conditions under which it allowstrade in a certain product type to all other WTO members. "Grant someone a special favor andyou have to do the same for all other WTO members." National treatment means that importedgoods should be treated no less favorably than domestically produced goods (at least after theforeign goods have entered the market) and was introduced to tackle non-tariff barriers to trade(e.g. technical standards, security standards et al. discriminating against imported goods).2.
 
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. A related point is that fora nation to negotiate, it is necessary that the gain from doing so be greater than the gainavailable from unilateral liberalization; reciprocal concessions intend to ensure that such gainswill materialize.3.
 
Binding and enforceable commitments
. The tariff commitments made by WTO members in amultilateral trade negotiation and on accession are enumerated in a schedule (list) of concessions. These schedules establish "ceiling bindings": a country can change its bindings, butonly after negotiating with its trading partners, which could mean compensating them for loss of trade. If satisfaction is not obtained, the complaining country may invoke the WTO disputesettlement procedures.
 4.
 
Transparency
. The WTO members are required to publish their trade regulations, to maintaininstitutions allowing for the review of administrative decisions affecting trade, to respond torequests for information by other members, and to notify changes in trade policies to the WTO.These internal transparency requirements are supplemented and facilitated by periodic country-specific reports (trade policy reviews) through the Trade Policy Review Mechanism (TPRM). TheWTO system tries also to improve predictability and stability, discouraging the use of quotas andother measures used to set limits on quantities of imports.5.
 
Safety valves
. 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 alsopublic health, animal health and plant health.

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