Q-2 WTO

Introduction:
The World Trade Organization (WTO), established in 1995, replaced the
General Agreement on Tariffs and Trade (GATT) as the only international body
dealing with the global rules of trade between nations. It is not a specialized
agency, but it has the existing mechanisms and practice of cooperation with the
United Nations.
Also, WTO administers international trade and investments accords. These
accords will gradually reduce governmental subsidies to industries and will
convert nontariff barriers into more transparent tariff barriers. The GATT and
now the WTO have made major contribution to improved trade and investment
flows around the world.
The activities of the WTO:
1) Trade negotiations - The WTO agreements cover goods, services and
intellectual property. They spell out the principles of liberalization, and
the permitted exceptions. They include individual countries
commitments to lower customs tariffs and other trade barriers, and to
open and keep open services markets. They set procedures for settling
disputes.
2) Implementation and monitoring - WTO agreements require
governments to make their trade policies transparent by notifying the
WTO about laws in force and measures adopted. Various WTO councils
and committees seek to ensure that these requirements are being followed
and that WTO agreements are being properly implemented.
3) Dispute settlement - The WTOs procedure for resolving trade quarrels
under the Dispute Settlement Understanding is vital for enforcing the
rules and therefore for ensuring that trade flows smoothly. Countries
bring disputes to the WTO if they think their rights under the agreements
are being infringed. Judgments by specially appointed independent
experts are based on interpretations of the agreements and individual
countries commitments.
4) Building trade capacity - WTO agreements contain special provision for
developing countries, including longer time periods to implement
agreements and commitments, measures to increase their trading
opportunities, and support to help them build their trade capacity, to

handle disputes and to implement technical standards. The WTO

organizes hundreds of technical cooperation missions to developing
countries annually. It also holds numerous courses each year in Geneva
for government officials. Aid for Trade aims to help developing countries
develop the skills and infrastructure needed to expand their trade.
5) Outreach - The WTO maintains regular dialogue with non-governmental
organizations, parliamentarians, other international organizations, the
media and the general public on various aspects of the WTO and the
ongoing Doha negotiations, with the aim of enhancing cooperation and
increasing awareness of WTO activities.
Understanding the WTO:
Essentially, the WTO is a place where member governments go, to try to
sort out the trade problems they face with each other.
At its heart are the WTO agreements, negotiated and signed by the bulk
of the worlds trading nations.
But the WTO is not just about liberalizing trade, and in some
circumstances its rules support maintaining trade barriers for example,
to protect consumers, prevent the spread of disease or protect the
environment.
What we stand for
The WTO agreements are lengthy and complex because they are legal texts
covering a wide range of activities. But a number of simple, fundamental
principles run throughout all of these documents. These principles are the
foundation of the multilateral trading system.
Non-discrimination . A country should not discriminate between its trading
partners and it should not discriminate between its own and foreign products,
services or nationals.
More open. Lowering trade barriers is one of the most obvious ways of
encouraging trade; these barriers include customs duties (or tariffs) and
measures such as import bans or quotas that restrict quantities selectively.
Predictable and transparent. Foreign companies, investors and governments
should be confident that trade barriers should not be raised arbitrarily. With
stability and predictability, investment is encouraged, jobs are created and

consumers can fully enjoy the benefits of competition choice and lower
prices.
More competitive. Discouraging unfair practices, such as export subsidies
and dumping products at below cost to gain market share; the issues are
complex, and the rules try to establish what is fair or unfair, and how
governments can respond, in particular by charging additional import duties
calculated to compensate for damage caused by unfair trade.
More beneficial for less developed countries. Giving them more time to
adjust, greater flexibility and special privileges; over three-quarters of WTO
members are developing countries and countries in transition to market
economies. The WTO agreements give them transition periods to adjust to the
more unfamiliar and, perhaps, difficult WTO provisions.
Protect the environment. The WTOs agreements permit members to take
measures to protect not only the environment but also public health, animal
health and plant health. However, these measures must be applied in the same
way to both national and foreign businesses. In other words, members must not
use environmental protection measures as a means of disguising protectionist
policies.
I.

The 10 things the WTO can do:

Cut living costs and raise living standards

Liberalization of trade conditions to increase the standard of living. We are all

consumers, and the price that we pay for food and clothing, and luxury items
need depend on trade policy. Protectionism is expensive: it raises prices. The
WTOs global system lowers trade barriers through negotiation and operates
under the principle of non-discrimination. The result is reduced costs of
production (because imports used in production are cheaper), reduced prices of
finished goods and services, more choice and ultimately a lower cost of living.
II.

Settle disputes and reduce trade tensions

The system of WTO allows finding a constructive approach to resolving trade

disputes.
With the growth of trade volumes, expansion of product range, as well as an
increase in the number of countries and trading companies, there is a certain

probability that the disputes will still arise. The WTO system helps resolve
disputes in a peaceful and constructive way. Countries participating in the
debate are always eager to act within the framework of existing agreements.
However, there is a downside of the liberalization and expansion of trade
processes. Expansion of trade flows means a greater probability emergence of
disputes. Without monitoring and supervision, these spores can lead to serious
conflict. Actually, an escalation of tensions in the area of international trade can
avoid, because the countries can apply to various organizations such as the
WTO to settle their trade disputes.
Developing countries are more active in WTO disputes
The annual number of disputes has declined overall. Developing countries are
active, reflecting their increasing participation in trade. However, their share of
disputes either in initiating complaints or being complained against has
fluctuated over the years.

III.

Stimulate economic growth and employment

The relationship between trade and jobs is complex. It is true that trade can
create jobs, but it is equally true that competition from imports can put
producers under pressure and lead them to lay off workers. In practice, there are
often actual evidence that the reduction of trade barriers has a positive impact
on the situation in the field of employment.
This is a complex issue and the approach to its solution should be appropriately.
But a careful analysis of all presupposes the existence of at least two problems.
Firstly, there are other factors. For example, technological progress also has a
powerful effect on employment and productivity by creating workplaces and
eliminating some other jobs. Second, while trade clearly promotes the growth of
the national income (and prosperity) it is not always associated with the creation
of new jobs, especially for those who have lost their jobs as a result of
competition from imports.
It is important to acknowledge that while trade holds real benefits for most
people, most of the time consumers as well as producers there are people
who are hurt by trade. Recognizing that trade can be a threat is important
socially and politically. Workers who have lost their jobs need support and polls
strongly suggest that people are far more likely to favor trade opening if they
know that such support will be available.
This is why governments need to maintain effective social programmes that can
protect workers who lose their jobs through trade and help train them to find
new jobs.

IV.

Cut the cost of doing business internationally

Many of the benefits of the trading system are more difficult to summarize in
numbers, but they are still important.
They are the result of essential principles at the heart of the system, and they
make life simpler for the enterprises directly involved in trade and for the
producers of goods and services.

Trade allows a division of labour between countries. It allows resources to be

used more efficiently and effectively for production. But the WTOs trading
system offers more than that. It helps to increase productivity and to cut costs
even more because of important principles enshrined in the system, designed to
make life simpler and clearer.
Discrimination complicates trade.
Non-discrimination is just one of the key principles of the WTOs trading
system. Others include:
transparency (clear information about policies, rules and regulations)
increased certainty about trading conditions (commitments to lower trade
barriers and to increase other countries access to ones markets are legally
binding)
simplification and standardization of customs procedure, removal of red
tape, centralized databases of information, and other measures to simplify
trade, known as trade facilitation.
Together, they make trading simpler, cutting companies costs. That, in turn,
means more jobs and better goods and services for consumers.
V.

Encourage good governance

Transparency shared information and knowledge levels the playing field.

Rules reduce arbitrariness and opportunities for corruption. They also shield
governments from lobbying by narrow interests.
Have the rules creates effective barriers to corruption.
The rules include the obligation to prevent the adoption of inadequate policy
decisions.
Some of the types of trade barriers bring additional negative element, because
the connected with unlimited possibilities in terms prosperity of corruption and
other forms of mismanagement.
One example of this kind of trade barriers with which the WTO is trying to
fight, for example, a quota that limits the annual minimum and maximum
amounts of import or export.

By limiting the volumes of deliveries, quotas to artificially raise prices creating

abnormally large profits. This profit remains in the pockets of lobbyists. It can
also become a breeding ground for corruption, it can also become a breeding
ground for corruption for example, in the allocation of quotas among traders.
WTO Agreements relate to a number of other areas, which can also help in the
fight against corruption and inefficient management practices.
Quite often governments resort to the help WTO as one of the variants of
positive external limiter their own policies.
VI.

Help countries develop

Underlying the WTOs trading system is the fact that more open trade can boost
economic growth and help countries develop. In that sense, commerce and
development are good for each other.
In addition, the WTO agreements are full of provisions that take into account
the interests of developing countries.
VII.

Give the weak a stronger voice

Small countries would be weaker without the WTO. Differences in bargaining

power are narrowed by agreed rules, consensus decision-making and coalition
building.
Coalitions give developing countries a stronger voice in negotiations. The
resulting agreements mean that all countries, including the most powerful, have
to play by the rules. The rule of law replaces might-makes-right.
One important point about the WTO is the practice of reaching decisions by
consensus. Every country has to be convinced before agreement can be reached.
Compromise is key: whatever is proposed has to be refined until it is acceptable
to everyone or more precisely until it is objectionable to no one. Consensus
means there are no dissenters.

Another is the agreed rules. All countries, big or small, weak or powerful, have
to follow broadly the same rules. There are exceptions, delays or flexibilities for
poorer countries, but they are still the same package of rules the flexibilities
are just a way of allowing these poorer countries to play by the rules.

Once the rules have been agreed, all countries are equal under them. That also
applies to the dispute settlement system, which is similar to a court. This
century, except in a handful of years, developing countries have filed
complaints in at least half of all legal disputes, sometimes considerably more.
And their complaints are against both developed and developing countries.
Without the WTO, these smaller countries would have been powerless to act
against their more powerful trading partners.
VIII.

Support the environment and health

Trade is nothing more than a means to an end. It could never be more important
than protecting the environment or raising the quality of life. What WTO
agreements do is to try to make trade support the things we really want,
including a clean and safe environment, and to prevent governments using these
objectives as an excuse for introducing protectionist measures.
The importance of many concerns is enshrined in the rules. The Marrakesh
Agreement Establishing the WTO includes among its objectives optimal use
of the worlds resources, sustainable development and environmental protection.
This is backed up by a range of provisions in the WTOs rules. For example,
they allow countries to curb trade to protect human, animal or plant life or
health, and conserve exhaustible natural resources. They allow subsidies for
environmental protection. These provisions can be found in more general rules
and in specific agreements on product standards, food safety, intellectual
property protection, and so on.
Reforms under the rules, such as cutting industrial and agricultural support, help
to reduce waste and environmental damage, and encourage efficient use of
resources.

The same applies to health. Here, the greatest attention has been on
pharmaceutical patents. The intellectual property (TRIPS) agreement is all
about balance. In public health, it protects inventors rights for a limited period
in order to encourage research into new and more effective treatments, but it
also allows governments room to manoeuvre so that the treatments are
affordable. Developing new medicines and allowing governments some
flexibility both contribute to better health.

IX.

Contribute to peace and stability

Trade helps to sustain growth.

Trade rules stabilize the world economy by discouraging sharp backward steps
in policy and by making policy more predictable.
When the world economy is in turmoil, the multilateral trading system can
contribute to stability. Some would argue that this can even contribute to
international peace. History is littered with examples of trade disputes
escalating into armed conflict.
Why was the system set up?
Essentially, it was for two reasons. One was the big-picture need to avoid a
repeat of the destructive trade tensions before World War II. The other was
countries pragmatic desire for their producers to trade more easily.
The result was the General Agreement on Tariffs and Trade (GATT), created in
1948, immediately after the war. Its success led to further reforms, and the
World Trade Organization (WTO) emerged in 1995.
Two of the most fundamental principles of the trading system are at work
here:
helping trade to flow smoothly,
and providing countries with a constructive and fair outlet for dealing
with disputes over trade issues.
Before: when protectionism backfired. The early 1930s saw a devastating trade
war. In the Great Depression, fear that imports would throw more people out of
work led governments to raise their trade barriers, thus setting off a vicious
cycle of retaliation. This simply worsened unemployment. The world economy
spiralled downwards, eventually contributing to the outbreak of World War II.
Protectionism can easily plunge us into a situation where no one wins and
everyone loses.
After: restraint and confidence. Post-war, under the GATT/WTO system trade
surged. More importantly, it has been much more stable, even during economic
crises. Agreed rules and confidence-building are key.

Confidence helps to avoid the no-win trade wars witnessed in the 1930s. When
governments believe that others will keep their trade barriers within agreed
limits, they will do the same. They will be in a much better frame of mind to
cooperate with each other.
The WTO trading system plays a vital role in creating and reinforcing that
confidence. Particularly important are negotiations that lead to agreement
by consensus and a focus on abiding by the rules.
X.

Be effective without hitting the headlines

Negotiations and disputes are news-makers, but a lot of vital WTO work takes
place out of the limelight to help trade flow smoothly, for the benefit of the
world economy and for all of us.
What governments have agreed to put into practice includes:
lower trade barriers
trimming red tape in customs and trade
justifications for restricting imports on health, safety and environmental
grounds that are rational, not arbitrary
disciplines on how they can react when imports increase sharply or the prices
of imports tumble
limits on harmful agricultural subsidies
access to services markets
intellectual property protection.
They also want to know that other countries are keeping their promises too
thats a right in addition to their own obligations to keep to the rules. And often
they want to see how other countries are putting the rules into practice because
they can learn from each other.
Much of this work is technical and detailed. It involves countries sharing
information with each other and with the public, on anything within the WTOs
scope, from anti-dumping investigations to labels listing food ingredients,
from copyright law to measures taken to combat bird flu.
It also includes opportunities for countries to comment on each others actions
and sometimes to influence the final outcome.
In the WTOs first 16 years, governments sent in over 10,000
notifications just on their regulations for food safety and animal and plant
health very detailed, very technical, but very important for specialists,
essential for trade and for health.
This does not make headlines when it works, few people notice. When
there is a problem, thats when it becomes news.

Ten myths about WTO

1.
2.
3.
4.
5.
6.

WTO dictates policy

WTO stands for free trade at any cost
Commercial interests have priority over the development of ...
... and on the environment
... and over health and safety
WTO prevents the creation of jobs, worsening the poverty
situation in the region
7. Small countries do not have the real power in the WTO
8. The WTO is the tool of powerful lobbies
9. Weaker countries are forced to join the WTO
10.
WTO - an undemocratic organization