World Trade Organization

The Uruguay round of General Agreement on Tariffs and Trade (GATT) (1968-93) gave birth to World
Trade Organization (WTO). World trade organization was formed as a replacement for General
Agreement on Tariffs and Trade in 1995 with the purpose of supervising and liberalizing international
trade.
Unlike GATT, World Trade Organization is a permanent organisation which has been establish on the
basis of an international treaty approved by participating countries accounting for over 97% of the world
trade.
The World Trade Organization (WTO) is the only global international organization dealing with the rules
of trades between nations. At its heart are the WTO agreements, negotiation and signed by the bulk of the
world’s trading nations and ratified in their parliaments.
The WTO has 164 members (including European Union) and 23 observer governments (like Iran, Iraq,
Bhutan, Libya etc)

Goals of World Trade Organization

 The WTO’s 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.
 The WTO’s system deals with these in two ways.
i. One is by talking: countries negotiation rules that are acceptable to all.
ii. The other is by settling dispute about whether countries are playing by those
agreed rules
 The WTO can stimulate economic growth and employment.
 The WTO can cut the cost of doing business internationally.
 The WTO can encourage good governance.
i. Transparency – shared information and
ii. Knowledge – levels the playing field.
 Rules reduce arbitrariness and opportunities for corruption.

Objectives of World Trade Organization

1. To accept the concept of sustainable development
2. To protect the environment
 3. To ensure optimum utilization of world resources
4. To enlarge production and trade of goods
5. To ensure full employment and increase in effective demand
6. To improve the standard of living of people of members countries

Function of World Trade Organization

1. To deal with regulation of trade between participating countries
2. To provide a framework for negotiations and formalization of trade agreements
3. It is responsible for enforcing trade laws and agreements
4. It monitors trade services and trade related aspects at intellectual property rights
5. To assist international organisations such as International Monetary Funds (IMF) and
International Bank for Reconstruction and Development
6. To provide a framework for dispute settlement

Structure of World Trade Organization

World Trade Organization is supervised by a highest authority called ministerial conferences which
consist of representative of all WTO members. It meets at least once in two years to take decisions on all
matters of multilateral trade.
WTO consists of a general body called general council which directly reports to the ministrial conference.
It delegates responsibilities to 3 bodies:-
a) Council for Trade in Goods
b) Council for Trade in Services
c) Council for Trade-related aspects of intellectual property rights
Benefits of World Trade Organization
 The system helps promote peace
 Disputes are handles constructively
 Free trade cuts the cost of living
 Provides more choice of products and quality
 Trade raise incomes and stimulates economic growth
 Governments are shielded from lobbying
 The system encourage good governance
 Trade liberalization has helped in economic growth
 It provides a platform for multilateral discussions
 It has helped in reducing various traffic and non-traffic barriers
 It reviews economic policies and formulate new ones through trade reviews

Drawbacks of World Trade Organization

 Industrialization and decision making are dominated by developed countries.
 Developing nations do not have financial resources to participate in WTO discussions on
negotiations
 Very less attention is given to the development of under developed countries
 Rules and regulations cannot be strictly enforced on developed countries who are members of
WTO