The Functions of WTO: Regulating Trade from Country to Country

function of wtoThe World Trade Organization (WTO) is an organization with the intention of liberalizing and supervising international trade. The organization deals with trade regulation between countries. The functions of the World Trade Organization (WTO) was formed officially on the first of January in 1995 under the Marrakesh Agreement with goals of liberalizing and supervising international trading among countries participating. A framework is provided by the WTO to negotiate and formalize agreements of trade and a process of dispute resolution aimed at enforcing adherence of participants to signed WTO agreements by member government’s representatives. Negotiations on the Doha Development Round is attempted to be completed by the organization, launched in 2001 with a focus explicitly to address developing countries’ needs. The future remains uncertain for the Doha Round as of June 2012.

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WTO Goals

The goals behind the functions of WTO were set out in the Marrakech Agreement preamble, and these include:

  • Expanding the trade production in services and goods
  • Ensuing large real incomes and demand are steadily growing
  • Ensuring employment that is full
  • Raising living standards.

The achievement of these objectives will happen while allowing for optimized use of the resources of the world in accordance with the objectives of sustainable developments and while seeking to preserve and protect the environment. The Marrakesh preamble also mentions specifically the need to assist countries that are developing especially the countries least developed and secure growing shares of international trading. Speaking of which, you might want to check out this course entitled International Expansion: A Blueprint for Success which is a profitable action plan that will help you expand your business through international partnerships and sales.

Most Important Functions

Among all the WT0 functions, there are two that are considered most important by analysts. These are:

  • It gives a provision for settling dispute and for negotiations in a forum.
  • It overseas the operation, administration and implementation of the agreements covered.

In addition, it is the duty of the World Trade Organization to propagate and review the national policies of trade and to guarantee the transparency and coherence of these policies by surveillance of economic making of policies around the globe. Another of the WTO’s priorities is assisting developing low-income, least developed and transitioning countries in adjusting to disciplines and rules of WT0 through technical training and cooperation.

Additional Functions of the WTO

As today’s society goes on with globalization, there is a vital importance that the trading systems be managed by the need for an international organization. As there is an increase in trade volume, issues such as violation of intellectual property, subsidies, trade barriers and protectionism come up due to every nation’s different rules of trading. The WTO serves as the nation’s mediator when problems arise. As a matter of fact, it could be said that the World Trade Organization one of the organizations most important in the globalized society of today and it can also be referred to as the result of globalization. Also, the World Trade Organization is an economic analysis and research center. Regular global trade picture assessments in its annual research reports and publications on specified topics are something the organization produces. The WT0 also closely cooperates with the other 2 system components, the World Bank and the IMF. Here is a great article entitled Advantages of International Trade and What to Watch Out for you might want to check out.

  • It is the duty of the World Trade Organization to go about facilitating operation, administration and implementation and further the objectives of the Multilateral Trade Agreements and this Agreement and shall also provide the operation, administration and implementation framework of the multilateral Trade Agreements.
  • With its view of achieving great global economic policy making coherence, the World Trade Organization shall, when appropriate, cooperate with the affiliated agencies of the International Bank for Reconstruction and Development and with the International Monetary Fund.
  • Among its members, the WTO shall provide the negotiations forum concerning their trade multilateral relations in matters that the Agreement in the Annexes to this Agreement deals with.
  • The WT0 is in charge of administering the trading policy review mechanism.
  • Part of the function of the World Trade Organization is to get the Understanding on Rules and Procedures Governing Dispute Settlement administered.
  • The Trade Policy Review Mechanism shall be administered by the WTO

Councils

The WTO covers trade-related intellectual property rights, services and goods. These councils began in just 1995 after the WTO was officially established from the Uruguay Round. Remember that one of the Uruguay Round’s major achievements has been the WTO establishment. GATT ceased being an institution that was separate and became a part of the World Trade Organization.

Structure

There are almost one hundred fifty-three WTO members that account for more than ninety-seven per cent of world’s trade. Around thirty others are negotiating members. The entire membership makes decisions and this is by consensus, typically. It is also possible to have a vote majority but the WTO has never used this and under the GATT, which was the WTO’s predecessor, this was extremely rare. In all the parliaments of the members is where all the WTO agreements have been ratified. The Ministerial Conferences is the top level WTO decision making body which meets a minimum of one time every couple of years.

Main Obstacles

The retention on farm subsidies protectionism to the agricultural domestic sector that developing countries request and the conflict between free trade on industrial services and goods as well as the international liberation on agricultural products fair trades remain the main obstacles of the WTO. These contention points have hindered the launching of new negotiations of the WTO beyond the Doha Development Round.

Making Decisions

An organization that is ‘member-driven and rules based’ is how the WTO describes itself. Every decision is made by government members and the rules are negotiation outcomes among each member. Votes are foreseen by the WTO Agreement where a consensus is not reached, but the consensus practice dominates in the decision-making process.

Trade Policies

There is a trade policy framework established by the WTO; it does not specify or define outcomes. In other words, it is concerned with rule setting of the games of trade policy. There are five principles that are particularly important:

  • Safety Valves

Governments are able to get trade restricted in certain circumstances. The agreements of the WTO permit every member to take measures to protect plant, animal and public health and also to protect the environment

  • Transparency

Members of the WTO need to get their regulations of trade published, and have a response for information requests made by the others for institutions to be maintained that allow for decision reviews of administration that affect trade and to inform trade policy changes to the World Trade Organization. These internal requirements of transparency are facilitated and supplemented by periodic reports that are country-specific. The system of WTO also attempts to improve stability and predictability, discouraging the use of measures like quotes to set limits of import quantities.

  • Enforceable and Binding Commitments

The WTO members made commitments of tariff in multilateral negotiations of trade and on accessions which are enumerated in a concessions list. These lists, also called schedules, establish that a country is able to alter is binding if it has already gone through negotiations with its partners in trade. This is also known as ‘ceiling bindings.’ Negotiations with trade partners could mean offering compensations for trade loss. If there is no obtained satisfaction, the country that complains might invoke the WTO procedures for settlement disputes.

  • Reciprocity

This reflects both desires to limit free riding scopes that could arise due to the rule of MFN and a desire to gain better foreign market access. A point related is that for nations to go through negotiations, it is a necessity that their gain for doing this would be more than the available gain from liberalization that unilateral. For such gains to materialize is intended to be ensured by reciprocal concessions.

  • Non-discrimination

There happen to be 2 primary components of non-discrimination including the national treatment policy and the MFN or the most favored nation rule. In the main WTO rules on intellectual, services and goods property, both are embedded, but their precise nature and scope differ in these arenas. The rule of MFN requires that WTO members need to apply on all trade conditions identical with other members of the WTO. Grant one person a special favor and you need to do the same with all other members of WTO. In other words, all members of the WTO need to be granted the conditions most favorable with which trading is allowed in certain types of products by a WTO member. Here is a course you might want to check out entitled Success in Global Business that will help you develop the cultural and commercial skills you need to be an international business success.

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