Assignment on World Trade Organization

Sidra Nazir (2019-ag-1207)

Aqsa sarwar (2019-ag-1210)

Sadia parveen (2019-ag-1200)

An introduction to the World Trade Organization

In a nutshell, the World Trade Organization (WTO) is an international organization

aiming to reduce all barriers to trade.

It achieves this by acting as a forum for countries to constantly re-negotiate to

remove blocks they have on trade. These re-negotiations are called Rounds.

Barriers to trade include tariffs (taxes) on products or services coming into a

country, as well as added tariffs/taxes that a foreign product or service might pay
within a country.

Barriers also include other blocks on trade like licencing or packaging

requirements or subsidies that a government might give to an industry like
agriculture or the arts.

Set up in 1995, the WTO is a young organization. Before this the GATT (General

Agreement on Tariffs and Trade) co-ordinated international trade but did so
without a permanent organization to support it.

Defination:

The World Trade Organization (WTO) is the only global international organization
dealing with the rules of trade between nations. At its heart are the WTO
agreements, negotiated and signed by the bulk of the world’s trading nations and
ratified in their parliaments. The goal is to help producers of goods and services,
exporters, and importers conduct their business.
World Trade Organization (WTO): Objectives and Functions

The important objectives of WTO are:

1. To improve the standard of living of people in the member countries.

2. To ensure full employment and broad increase in effective demand.

3. To enlarge production and trade of goods.

4. To increase the trade of services.

5. To ensure optimum utilization of world resources.

6. To protect the environment.

7. To accept the concept of sustainable development.

Functions:

The main functions of WTO are discussed below:

1. To implement rules and provisions related to trade policy review mechanism.

2. To provide a platform to member countries to decide future strategies related

to trade and tariff.

3. To provide facilities for implementation, administration and operation of

multilateral and bilateral agreements of the world trade.

4. To administer the rules and processes related to dispute settlement.

5. To ensure the optimum use of world resources.

6. To assist international organizations such as, IMF and IBRD for establishing
coherence in Universal Economic Policy determination.

Services and roles of WTO

 ● It is an organization for trade opening.
● It is a forum for governments to negotiate trade. agreements.
● It is place for governments to settle trade disputes.
● It operates a system of trade rules.
● WTO is a place where member governments try to sort out the trade
problems they face to each other.

Advantages and disadvantages of WTO

The WTO is a body designed to promote free trade through organizing trade
negotiations and act as an independent arbiter in settling trade disputes. To some
extent the WTO has been successful in promoting greater free trade. The
principles of the WTO are

1. Helps promote peace within nations:

 Peace is partly an outcome of two of the most fundamental principle of the
trading system; helping trade flow smoothly and providing countries with a
constructive and fair outlet for dealing with disputes over trade issues. Peace
creates international confidence and cooperation that the WTO creates and
reinforces.

Disputes are handled constructively:

 As trade expands in volume, in the numbers of products traded and in the
number of countries and company trading, there is a greater chance that
disputes will arise. WTO helps resolve these disputes peacefully and
constructively. If this could be left to the member states, the dispute may lead
to serious conflict, but lot of trade tension is reduced by organizations such as
WTO.

Rules make life easier for all:

 WTO system is based on rules rather than power and this makes life easier for all
trading nations. WTO reduces some inequalities giving smaller countries more
voice, and at the same time freeing the major powers from the complexity of
having to negotiate trade agreements with each of the member states.

Free trade cuts the cost of living:

  Protectionism is expensive, it raises prices, and WTO lowers trade barriers
through negotiation and applies the principle of non-discrimination. The result
is reduced costs of production (because imports used in production are
cheaper) and reduced prices of finished goods and services, and ultimately a
lower cost of living.

It provides more choice of products and qualities:

 It gives consumer more choice and a broader range of qualities to choose
from.

Trade raises income: Through WTO trade barriers are lowered and this
increases imports and exports thus earning the country foreign exchange thus
raising the country's income. 

Trade stimulates economic growth: With upward trend economic growth,

jobs can be created and this can be enhanced by WTO through careful policy
making and powers of freer trade. 

Basic principles make life more efficient: 

The basic principles make the system economically more efficient and they cut
costs. Many benefits of the trading system are as a result of essential principle
at the heart of the WTO system and they make life simpler for the enterprises
directly involved in international trade and for the producers of
goods/services. Such principles include; non-discrimination, transparency,
increased certainty about trading conditions etc. together they make trading
simpler, cutting company costs and increasing confidence in the future and
this in turn means more job opportunities and better goods and services for
consumers. 

Governments are shielded from lobbying: 

WTO system shields the government from narrow interest. Government is better
placed to defend themselves against lobbying from narrow interest groups by
focusing on trade-offs that are made in the interests of everyone in the economy. 
The system encourages good governance:
 The WTO system encourages good government. The WTO rules discourage a
range of unwise policies and the commitment made to liberalize a sector of
trade becomes difficult to reverse. These rules reduce opportunities for
corruption.

Disadvantages of WTO:

The WTO is fundamentally undemocratic: The policies of the WTO impact all

aspects of society and the planet, but it is not a democratic, transparent
institution. The WTO rules are written by and for corporations with inside
access to the negotiations. For example, the US Trade Representative gets
heavy input for negotiations from 17 "Industry Sector Advisory Committees"
Citizen input by consumer, environmental, human rights and labor
organizations is consistently ignored. Even simple requests for information are
denied, and the proceedings are held in secret.

The WTO won’t make us safer: 

The WTO would like you to believe that creating a world of free trade will
promote global understanding and peace. On the contrary, the domination of
international trade by rich countries for the benefit of their individual interests
fuels anger and resentment that make us less safe. To build real global
security, we need international agreements that respect people's rights to
democracy and trade systems that promote global justice.
The WTO tramples labor and human rights:
 WTO rules put the rights of corporations to profit over human and labor
rights. The WTO encourages a race to the bottom in wages by pitting workers
against each other rather than promoting internationally recognized labor
standards. The WTO has ruled that it is illegal for a government to ban a
product based on the way it is produced, such as with child labor. It has also
ruled that governments cannot take into account non commercial values such
 as human rights, or the behavior of companies that do business with vicious
dictatorships such as Burma when making purchasing decisions.
The WTO Would Privatize Essential Services:
 The WTO is seeking to privatize essential public services such as education, health
care, energy and water. Privatization means the selling off of public assets such as
radio airwaves or schools to private corporations, to run for profit rather than the
public good. The WTO's General Agreement on Trade in Services, or GATS,
includes a list of about 160 threatened services including elder and child care,
sewage, garbage, park maintenance, telecommunications, construction, banking,
insurance, transportation, shipping, postal services, and tourism. In some
countries, privatization is already occurring. Those least able to pay for vital
services working class communities and communities of color - are the ones who
suffer the most. 

The WTO Is Destroying the Environment:

 The WTO is being used by corporations to dismantle hard-won local and
national environmental protections, which are attacked as barriers to trade.
The very first WTO panel ruled that a provision of the US Clean Air Act,
requiring both domestic and foreign producers alike to produce cleaner
gasoline, was illegal. The WTO declared illegal a provision of the Endangered
Species Act that requires shrimp sold in the US to be caught with an
inexpensive device allowing endangered sea turtles to escape. The WTO is
attempting to deregulate industries including logging, fishing, water utilities,
and energy distribution, which will lead to further exploitation of these natural
resources. 

The WTO is Killing People:

 The WTO's fierce defense of Trade Related Intellectual Property rights (TRIPs)
patents copyrights and trademarks comes at the expense of health and human
lives. The WTO has protected for pharmaceutical companies right to profit
against governments seeking to protect their people's health by providing
lifesaving medicines in countries in areas like sub-saharan Africa, where
thousands die every day from HIV/AIDS. Developing countries won an
 important victory in 2001 when they affirmed the right to produce generic
drugs (or import them if they lacked production capacity), so that they could
provide essential lifesaving medicines to their populations less expensively.
Unfortunately, in September 2003, many new conditions were agreed to that
will make it more difficult for countries to produce those drugs. Once again,
the WTO demonstrates that it favors corporate profit over saving human lives.
Impact of WTO on Agriculture Sector in Pakistan :

The Uruguay Round Agreement on Agriculture (URAOA), 1986-94, was the first
step towards inclusion of the agriculture sector within the global trade rules of
the GATT. Given the fact that the Agreement on Agriculture (AoA) has a direct
bearing on the member countries of the World Trade Organisation (WTO), this
study explores the impact of the agriculture sector liberalisation in Pakistan by
comparing it with the situation before hand. the paper argues that in view of the
current global trade regime, Pakistan, has gone too far in liberalising its
agriculture sector, something which can have implications for its agriculture,
trade, as well as domestic producers and consumers of agriculture products.
Therefore, it is suggested that some degree of protection is justified to remain
competitive and retain its domestic capacity to respond to world demand for its
agriculture exports – a critical factor in achieving any gains from trade
liberalisation, as well as to maintain consumer food security. While these
objectives can be pursued within the WTO limits by using options available in the
WTO Agreements, these will surely be subject to financial constrains. The paper
outlines Pakistan’s negotiating position and strategy for the Doha Round of WTO
talks, as well as the positions of other negotiating groups and parties. In light of
the Final Framework Package (July 2004) negotiated by the participants, the
argument is made that although the Doha Round was far more success

Impact on Industrial sector in Pakistan

• Empirical results showed that WTO has positive impact on Pakistan’s

economy.
• In case of Pakistan exchange rate has a significant impact on GDP, services,
per capita income and foreign direct investment.

• But impact on production of agriculture and production of industry is

insignificant.

• 10 common misunderstandings

• about the WTO

The 10 misunderstandings
1. The WTO dictates policy
2. The WTO is for free trade at any cost
3. Commercial interests take priority over development …
4. … and over the environment
5. … and over health and safety
6. The WTO destroys jobs, worsens poverty
7. Small countries are powerless in the WTO
8. The WTO is the tool of powerful lobbies
9. Weaker countries are forced to join the WTO
10. The WTO is undemocratic

1. The WTO does NOT tell governments what to do

The WTO does not tell governments how to conduct their trade policies. Rather, it’s
a “member-driven” organization.
the rules of the WTO system are agreements resulting from negotiations
among member governments, the rules are ratified by members’
parliaments, and • decisions taken in the WTO are virtually all made by
consensus among all members.
In other words, decisions taken in the WTO are negotiated, accountable
and democratic.
The only occasion when a WTO body can have a direct impact on a
government’s policies is when a dispute is brought to the WTO and if
that leads to a ruling by the Dispute Settlement Body (which consists of
 all members). Normally the Dispute Settlement Body makes a ruling by
adopting the findings of a panel of experts or an appeal report.
Even then, the scope of the ruling is narrow: it is simply a judgement or
interpretation of whether a government has broken one of the WTO’s
agreements—agreements that the infringing government had itself
accepted. If a government has broken a commitment it has to conform.
In all other respects, the WTO does not dictate to governments to adopt
or drop certain policies.
As for the WTO Secretariat, it simply provides administrative and
technical support for the WTO and its members.
In fact: it’s the governments who dictate to the WTO.
2. The WTO is NOT for free trade at any cost
It’s really a question of what countries are willing to bargain with each
other, of give and take, request and offer.
Yes, one of the principles of the WTO system is for countries to lower
their trade barriers and to allow trade to flow more freely. After all,
countries benefit from the increased trade that results from lower trade
barriers.
But just how low those barriers should go is something member
countries bargain with each other. Their negotiating positions depend
on how ready they feel they are to lower the barriers, and on what they
want to obtain from other members in return. One country’s
commitments become another country’s rights, and vice versa.
The WTO’s role is to provide the forum for negotiating liberalization. It
also provides the rules for how liberalization can take place.
The rules written into the agreements allow barriers to be lowered
gradually so that domestic producers can adjust. They have special
provisions that take into account the situations that developing
countries face. They also spell out when and how governments can
protect their domestic producers, for example from imports that are
considered to have unfairly low prices because of subsidies or
“dumping”. Here, the objective is fair trade.
 Just as important as freer trade— perhaps more important—are other
principles of the WTO system. For example: non- discrimination, and
making sure the conditions for trade are stable, predictable and
transparent.

3. The WTO is NOT only concerned about commercial

interests. This does NOT take priority over
development .
The WTO agreements are full of provisions taking the interests of
development into account.
Underlying the WTO’s trading system is the fact that freer trade boosts
economic growth and supports development. In that sense, commerce
and development are good for each other.
At the same time, whether or not developing countries gain enough
from the system is a subject of continuing debate in the WTO. But that
does not mean to say the system offers nothing for these countries. Far
from it. The agreements include many important provisions that
specifically take developing countries’ interests into account.
Developing countries are allowed more time to apply numerous
provisions of the WTO agreements. Least-developed countries receive
special treatment, including exemption from many provisions.
The needs of development can also be used to justify actions that might
not normally be allowed under the agreements, for example
governments giving certain subsidies.
And the negotiations and other work launched at the Doha Ministerial
Conference in November 2001 include numerous issues that developing
countries want to pursue.
4. In the WTO, commercial interests do NOT take priority over
environmental protection
Many provisions take environmental concerns specifically into account.
 The preamble of the Marrakesh Agreement Establishing the World
Trade Organization includes among its objectives, optimal use of the
world’s resources, sustainable development and environmental
protection.
This is backed up in concrete terms by a range of provisions in the
WTO’s rules. Among the most important are umbrella clauses (such as
Article 20 of the General Agreement on Tariffs and Trade) which allow
countries to take actions to protect human, animal or plant life or
health, and to conserve exhaustible natural resources.
Beyond the broad principles, specific agreements on specific subjects
also take environmental concerns into account. Subsidies are permitted
for environmental protection. Environmental objectives are recognized
specifically in the WTO agreements dealing with product standards, food
safety, intellectual property protection, etc.
In addition, the system and its rules can help countries allocate scarce
resources more efficiently and less wastefully. For example, negotiations
have led to reductions in industrial and agricultural subsidies, which in
turn reduce wasteful over-production.
A WTO ruling on a dispute about shrimp imports and the protection of
sea turtles has reinforced these principles. WTO members can, should
and do take measures to protect endangered species and to protect the
environment in other ways, the report says. Another ruling upheld a ban
on asbestos products on the grounds that WTO agreements give priority
to health and safety over trade.
What’s important in the WTO’s rules is that measures taken to protect
the environment must not be unfair.
5. The WTO does NOT dictate to governments on issues such as
food safety, and human health and safety. Again commercial
interests do NOT override
The agreements were negotiated by WTO member governments, and
therefore the agreements reflect their concerns.
 Key clauses in the agreements (such as GATT Art. 20) specifically allow
governments to take actions to protect human, animal or plant life or
health. But these actions are disciplined, for example to prevent them
being used as an excuse for protecting domestic producers—
protectionism in disguise.

Some of the agreements deal in greater detail with product standards, and
with health and safety for food and other products made from animals and
plants. The purpose is to defend governments’ rights to ensure the safety
of their citizens.

As an exemple, a WTO dispute ruling justified a ban on asbestos

products on the grounds that WTO agreements do give priority to health
and safety over trade.

At the same time, the agreements are also designed to prevent

governments setting regulations arbitrarily in a way that discriminates
against foreign goods and services. Safety regulations must not be
protectionism in disguise.

One criterion for meeting these objectives is to base regulations on

scientific evidence or on internationally recognized standards.

Again, the WTO does not set the standards itself. In some cases other
international agreements are identified in the WTO’s agreements. One
example is Codex Alimentarius, which sets recommended standards for
food safety and comes under the UN Food and Agriculture Organization
(FAO) and World Health Organization (WHO).

But there is no compulsion to comply even with internationally negotiated

standards such as those of Codex Alimentarius. Governments are free to
set their own standards provided they are consistent in the way they try to
avoid risks over the full range of products, are not arbitrary, and do not
discriminate.
6. The WTO does NOT destroy jobs or widen the gap
between rich and poor changes in developed
countries.
Much of the rest is attributable to “skillbased technological change”. In
other words, developed economies are naturally adopting more
technologies that require labour with higher levels of skill.

The alternative to trade—protection— is expensive because it raises costs

and encourages inefficiency. According to another OECD calculation,
imposing a 30% duty on imports from developing countries would actually
reduce US unskilled wages by 1% and skilled wages by 5%. Part of the
damage that can be caused by protectionism is lower wages in the
protectionist country.

At the same time, the focus on goods imports distorts the picture. In
developed countries, 70% of economic activity is in services, where the
effect of foreign competition on jobs is different—if a foreign
telecommunications company sets up business in a country it may employ
local people, for example.

Finally, while about 1.15 billion people are still in poverty, research, such as
by the World Bank, has shown that trade liberalization since World War II
has contributed to lifting billions of people out of poverty. The research has
also shown that it is untrue to say that liberalization has increased
inequality.

In particular, some countries are better at making the adjustments than

others. This is partly because they have more effective adjustment policies.
Those without effective policies are missing an opportunity because the
boost that trade gives to the economy creates the resources that help
adjustments to be made more easily.

The WTO tackles these problems in a number of ways. In the WTO,

liberalization is gradual, allowing countries time to make the necessary
adjustments. Provisions in the agreements also allow countries to take
contingency actions against imports that are particularly damaging, but
under strict disciplines.

At the same time, liberalization under the WTO is the result of negotiations.
When countries feel the necessary adjustments cannot be made, they can
and do resist demands to open the relevant sections of their markets.

There are also many other factors outside the WTO’s responsibility that are
behind recent changes in wage levels.

Why for example is there a widening gap in developed countries between

the pay of skilled and unskilled workers? According to the OECD, imports
from low-wage countries account for only 10–20% of wage

The accusation is inaccurate and simplistic. Trade can be a powerful force

for creating jobs and reducing poverty. Often it does just that. Sometimes
adjustments are necessary to deal with job losses, and here the picture is
complicated. In any case, the alternative of protectionism is not the
solution. Take a closer look at the details.

The relationship between trade and employment is complex. So is the o is

the relationship between trade and equality.

Freer-flowing and more stable trade boosts economic growth. It has the
potential to create jobs, it can help to reduce poverty, and frequently it
does both.

The biggest beneficiary is the country that lowers its own trade barriers.
The countries exporting to it also gain, but less. In many cases, workers
in export sectors enjoy higher pay and greater job security

However, producers and their workers who were previously protected

clearly face new competition when trade barriers are lowered. Some
survive by becoming more competitive. Others don’t. Some adapt quickly
(for example by finding new employment), others take longer.
7. Small countries are NOT powerless in the WTO.
Small countries would be weaker without the WTO. The WTO increases
their bargaining power.
In recent years, developing countries have become considerably more
active in WTO negotiations, submitting an unprecedented number of
proposals in the agriculture talks, and working actively on the ministerial
declarations and decisions issued in Doha, Qatar,
in November 2001. They expressed satisfaction with the process leading
to the Doha declarations. All of this bears testimony to their confidence
in the system.
At the same time, the rules are the result of multilateral negotiations
(i.e. negotiations involving all members of GATT, the WTO’s
predecessor). The most recent
negotiation, the Uruguay Round (1986–94), was only possible because
developed countries agreed to reform trade in textiles and agriculture—
both issues were important for developing countries.
In short, in the WTO trading system, everyone has to follow the same
rules.
As a result, in the WTO’s dispute settlement procedure, developing
countries have successfully challenged some actions taken by developed
countries. Without the WTO, these smaller countries would have been
powerless to act against their more powerful trading partners.
8. The WTO is NOT the tool of powerful lobbies.
The WTO system offers governments a means to reduce the influence of
narrow vested interests.
This is a natural result of the “rounds” type of negotiation (i.e.
negotiations that encompass a broad range of sectors). The outcome of
a trade round has to be a balance of interests.
Governments can find it easier to reject pressure from particular
lobbying groups by arguing that it had to accept the overall package in
the interests of the country as a whole.
 • A related misunderstanding is about the WTO’s membership. The WTO
is an organization of governments.
The private sector, non-governmental organizations and other lobbying
groups do not participate in WTO activities except in special events such
as seminars and symposiums.
They can only exert their influence on WTO decisions through their
governments.
9. Weaker countries do have a choice, they are NOT
forced to join the WTO
Most countries do feel that it’s better to be in the WTO system than to
be outside it. That’s why the list of countries negotiating membership
includes both large and small trading nations.
The reasons are positive rather than negative. They lie in the WTO’s key
principles, such as non-discrimination and transparency. By joining the
WTO, even a small country
automatically enjoys the benefits that all WTO members grant to each
other. And small countries have won dispute cases against rich countries
– they would not have been able to do so outside the WTO.
The alternative would be to negotiate bilateral trade agreements with
each trading partner. That could even include regularly negotiating the
regular renewal of commitments to treat trading partners as equals.
For this, governments would need more resources, a serious problem
for small countries. And in bilateral negotiations smaller countries are
weaker.
By joining the WTO, small countries can also increase their bargaining
power by forming alliances with other countries that have common
interests.
10. The WTO is NOT undemocratic
Decisions in the WTO are generally by consensus. In principle, that’s
even more democratic than majority rule because no decision is taken
until everyone agrees
It would be wrong to suggest that every country has the same
 bargaining power. Nevertheless, the consensus rule means every
country has a voice, and every country has to be convinced before it
joins a consensus. Quite often reluctant countries are persuaded by
being offered something in return.
Consensus also means every country accepts the decisions. There are no
dissenters.
What is more, the WTO’s trade rules, resulting from the Uruguay Round
trade talks, were negotiated by member governments and ratified in
members’ parliaments.
Conclusion:
• It is the place where the member of countries are come and talk togahter and share
their grievance In order to resolve their problems related to International trade.
• The countries make their decisions through various councils and committees, whose
membership consist of all WTO members.
• The system help promote peace, by handling disputes of member countries.
• It provides free trade which cuts the costs of living and provide the more choices of
products and qualities and stimulates economic growth.
• WTO deals with the special needs of developing countries as two third of the WTO
members are developing countries and they play an increasingly important and active
role in the WTO.
Because of their members, because they are becoming more important in the global
economy and because they increasingly look to trade as a vital tool in their development
efforts.