WTO- WORLD TRADE ORGANIZATION

WTO – World Trade Organisation, was established on 1st january 1995 to replace the GATT
(General Agreement on Trade and Tariff). The WTO has 164 members, accounting for 98% of world
trade. A total of 25 countries are negotiating membership. Decisions are made by the entire
membership. This is typically by consensus. Its based in Gneva, Swtizerland.

The World Trade Organization (WTO) is the only international organization dealing with the global
rules of trade. Its main function is to ensure that trade flows as smoothly, predictably and freely as
possible.. WTO is required to build a rule-based trading government in which countries cannot place
unreasonable constraints on trade.

Objectives of WTO
 To set and execute rules for international trade
 To present a panel for negotiating and controlling additional trade liberalization
 To solve trade conflicts
 To improve the clarity of decision-making methods
 To raise the standard of living in member countries.
 To eliminate discriminatory treatment in international trade relationships.
 To protect the environment


Functions of  WTO:

 It facilitates international trade through the removal of tariff and non-tariff barriers.
 It provides greater market access to all member countries.

 It establishes a rule-based trading regime, in which nations cannot place arbitrary

restrictions on trade.

 It frames fair global rules, regulations.

 It safeguards and advocates the interests of the developing world.

 It is also responsible to increase production and trade of services.

 It ensures optimum utilisation of world resources.

 It provides support to developing nations in trade policy issues through technical

assistance and training programs

The WTO Agriculture Agreement provides a framework for the long-term reform of agricultural trade and
domestic policies. Other agreements of the organization spell out the countries’ rights and obligations and
given them flexibility in implementing their commitments.
PRIVATIZATION
Privatization occurs when a government-owned business, operation, or property becomes owned by a
private, non-government party. It’s a policy tool for generating growth. It generally helps governments
save money and increase efficiency. It limits government participation in economic activities and
safeguards the private sector and establishes economic democracy and allows private sectors to operate
in economic activities freely.

Privatization of specific government operations happens in a number of ways: through Public sale of
shares, Public auction, Public tender, Direct negotiations, Transfer of control of enterprises that were
controlled by the state or by municipalities, Lease with a right to purchase. Privatisation of the public
sector companies by selling off parts of the equity of PSEs to the public is known as disinvestment.

Objectives of Privatisation
 Privatisation aims at providing a strong base for the inflow of FDI.
 The increased inflow of FDI improves the financial strength of the economy.

 The efficiency of public sector undertakings (PSUs) is improved by giving them the autonomy
to make decisions.

Privatization opens unprecedented opportunities for investment throughout the world. Thus, it is a
major force in the globalization of business, and it is of great interest to investors and businesses
around the world. Firstly, the competition in the private sector fosters more efficient practices, which
eventually yield better service and products, lower prices and less corruption. This even encourages
shareholders to invest as they would get better returns. Privatization also encourages FDI and trade
as there are less governmental interferences. The government will also increase their revenues
from the sale of goods and services- through the sale of government-owned businesses can
generate cash for the government. It can aslo discontinue subsidies to unprofitable business
and can get rid off inefficient labor. Privatized firms will provide employment to the workers.
Privatized businesses can become tax-paying entities, which, in turn, generate sorely needed
funds for local and national governments. The funds of the government enable

Pressure from international organizations has been another force leading to privatization.
The International Monetary Fund (IMF) and the World Bank have required privatization of
unprofitable government-owned businesses as a prerequisite to obtaining loans sought by debt-
ridden governments

For any economy, privatisation is important because it creates jobs and builds a healthy
competition in the market. Privatisation works for maximising profit by improving the standards
of customer services and goods. privately-owned companies run businesses more economically
and efficiently because they are profit incentivized to eliminate wasteful spending. However
necessities like electricity, water, and schools shouldn’t be vulnerable to market forces or driven
by profit.
Theory of Comparative Advantage
The most basic concept in the whole of int trade theory is Ricardo’s theory of comparative advantage
that suggests countries should specialize in the production of those goods they produce most efficiently
and buy goods that they produce less efficiently from other countries- even if this means buying goods
from other countries that they could produce more efficiently at home. If countries do specialize in this
way, total world production will be greater .

comparative advantage is an economic strategy countries can use to determine which goods
and services they should allocate resources toward. It measures opportunity cost. In other
words, it measures what a country has to give up to produce a certain good or service.

The theory assumes that two nations are producing one product.

The theory can be explained through the following example: