What is World Trade Organization - Assignment Example

What is WTO? The World Trade Organization (WTO) has been created to supervise and liberalize international trade. It is an international organizationwhich came into being on January 1, 1995. WTO is actually the successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1948, and operated for almost five decades. The major aim of the WTO is to promote free trade and stimulate economic growth of its member countries. It negotiates and implements new trade agreements among its member countries. WTO has also the responsibility of policing member countries adherence to all the WTO agreements. WTO has 150 members , Vietnum being the 150th. WTO derives its strength from the commitment of its member nations to managing trade with a common set of values including honesty, sincerity, transparency, predictability, nondiscrimination and a rule-based dispute resolution. WTO contains a basic set of rules that all its member states have to comply with. These rules basically put some obligation on the member nations. Some of the general obligation faced by the member countries are as follows: each member nation (i) must apply the same trade policies to all WTO members (with exceptions for regional agreements), (ii) must treat foreign goods equally with domestically produced ones when applying trade-related regulations, (iii) must not use quotas or export subsidies, (iv) should impose tariffs which are more transparent. Apart from this a member nation has to promise not to augment the level of ordinary customs duties above levels negotiated with other WTO members. (Bossche, 2005) Advantages and disadvantages of joining WTO Joining the WTO is basically a commitment to enter the world market which is governed by a set of transparent and strict rules and regulations, to access to the large and open market of 150 countries . Once a country joins the WTO, it is granted with both benefits and responsibilities, advantages and disadvantages, and great opportunities and big challenges at the same time. When a nation joins the WTO, it gets an access to huge international market. Joining the WTO also sends a strong signal to the nation’s trade and investment partners about that country’s future direction in respect of trade. Not only in respect of trade, joining the WTO could be considered as a spanking new start of a comprehensive reform in economy, law, administration, education, training, and culture. Once a country joins the WTO, its economy starts to adjust to market changes that lead to labor and training changes. Joining the WTO apparently provides the signal of huge economic development in near future, but these developments not only comes with a lot of favorable opportunities but also with high risks. Since a member country requires to undertake a substantial set of reform programs for leveraging the benefits of market access requires, domestic producers face a number of impediments including tariffs that tend to undermine the benefits of improved market access. The risks in business and investment become very high. Therefore, it can be said that membership of WTO brings about a large set of benefits to a nation along with certain disadvantages. (Korten, 1995) The major advantages and disadvantages that a country is likely to be granted with after joining the WTO are as follows: The major advantages that a country enjoys after joining the WTO are as follows:- By joining WTO, a country no longer be discriminated against in an unjust way by other countries according to the rules and regulation underlying the trading system implemented by WTO. This provides improved market access in a wide range of products and a wide range of countries. Joining WTO is very conducive to increasing export and attracting foreign capital. After entering the WTO, a country not only enjoys the advantages offered by other countries and regions opening their markets, but the WTO membership status also enable it’s products to possess more favorable competitive conditions than before, thereby promoting the countries export trade. Joining WTO also produces favorable conditions for accelerating the readjustment and upgradation of the domestic industrial structure. For any country, particularly for developing nations, the readjustment and upgradation of the industrial structure appears to be an important and pressing task. Joining the WTO, however, creates a favorable international environment for the completion of this huge and complicated task. By opening its markets to other member countries, a country can extensively use foreign capital and technology to do a make over of its traditional industries and accelerate the development of high-tech industries and service trades, and raise the overall levels of its industrial development. It is also conducive to a country’s participation in the world economic globalization process. In this process it can better pursue benefits and avoid harms and protect and expand itself. Entry into WTO helps a nation to participate in international competition and international cooperation. It also helps a nation to build its own transnational companies, set up enterprises in other counties and enhance the international competitiveness of the its economy. It also provides an opportunity to all the people of the member state as being the consumers, i.e. to access to a wide variety of the goods and services, enjoy the low prices as a result of tariff reduction and competitiveness, and the growth of the information technology. People of the member nations get the opportunity of expanding their vision towards other civilizations and cultures, learning from the achievements of others, and at the same time developing their own national cultural values. (Bhagwati, 2005) The major disadvantages of joining WTO are as follows - After a country enters into WTO, it has to meet some adjustment costs as it opens its markets to firms who hail from more competitive atmospheres. If the country is underdeveloped, or developing, it generally suffers from lack of commercial credit, legal infrastructure, a well-knit net work of market information, industry associations, skill development institutions. Adding to these, high costs of doing business ensure that many domestic firms of a developing or underdeveloped country cannot be immediately competitive. As imports displace some domestic production, a huge number of jobs are also lost in short run. Joining WTO puts a set of Obligations on a country. These obligations require the member states to spend substantial human and financial resources on reform. For instance, implementing TRIPS requires extensive review and possibly rewriting of laws in many member states (e.g. Cambodia). In certain areas the government may feel it necessary to set up new agencies or reorganize existing ones, acquire specialized equipment, and augment skill of government officials. These reforms are found to compete with other public policy priorities for scarce government resources in many countries, particularly in less developed member states By joining a large international organization like WTO with established rules and regulation, there takes place an inevitable tradeoff in terms of freedoms to set policies of a country, particularly those policies that might contradict the core values and rules of WTO. For example, after entering into WTO, a country no longer enjoys the freedom of selectively offering access to its markets to a narrow set of countries at the cost of all other WTO members, or offering high tariff protection beyond what was negotiated. Since entering into WTO causes further opening up of the domestic market to huge international market, some domestic products, firms and industries face more intense competition. This creates huge pressure on the speed and steps of opening the market. The expansion in market access is accompanied by the reduction of tariffs and the abolition of non-tariff measures; more foreign products, services and investments possibly enter domestic markets. As a result domestic enterprises will face fiercer competition from very competitive international firms. Once a country joins WTO, foreign economic and trade management, to a large extent, becomes subject to the restriction of WTO rules. The country’s foreign-related economic laws, regulations and policies has to completely conform with the stipulations of WTO regulations. It becomes a huge and complicated task for a nation to restructure its foreign economic and trade related laws so as to conform with WTO rules and regulation. The adjudication on the solution of multilateral disputes among member states may also possibly produce results unfavorable to a certain country. (Bhagwati, 2005) Therefore, a country, after joining WTO, has to face the challenges of competing with stronger competitors even in the domestic market, complying with the stricter and fiercer regulations. Opportunities and challenges are, however, neither static nor the same for each country, and even within a country not same to each industry, each province. Advantages and disadvantages are intertwined and often transferable. If a country is very dynamic, eager to learn, and very reforming then the country will have more advantages and the less advantages to joining WTO. WTO – is it a rich nation’s organisation? Although the basic aim of WTO is to promotefreetrade and augment economic growth, very often it is accused of benefiting richer nations to the detriment of poorer ones. WTO treaties have been accused of a partial and unfair bias toward multinational corporations and wealthy nations.Some people argue that free trade leads to a divergence instead of convergence of income levels within rich and poor countries. Critics of WTO argues that small countries in the WTO receives little positive influence, and despite the WTO aim of helping the developing countries, the most powerful and influential nations in the WTO mainly put their focus on their own commercial interests. The working of WTO has also been criticised on the ground that it does not manage the global economy impartially, it has a systematic bias toward rich countries and multinational corporations, harming smaller countries which have less negotiation power. The bias exercised by WTO can be illustrsted by the following examples: WTO’s rules and regulation allowe rich countries to maintain high import duties and quotas in certain products, thereby blocking imports from developing countries (e.g. clothing). Rich nations can also increase non-tariff barriers such as anti-dumping measures against developing countries. It provides huge opprtunity to the rich nations for protecting their domestic markets. Under WTO Rules developed nations are allowed to provide high protection to agriculture , while developing ones are pressed to open their markets to international competional, thereby hurting the interests of the farmers of developing nations. (Bhagwati, 2005; Korten, 1995). Conclusion Critics argue that developing countries have not benefited from the WTO Agreements of the Uruguay Round, and, therefore, the credibility of the WTO trade system could be eroded. The process of economic globalization hat is fostered by WTO through the promotion of free trade generally found to create wealth only for the rich and powerful developed nations who benefit from the surge of consolidations, mergers, global scale technology and financial activity. According to the critics of WTO the rising tide of free trade and (economic) globalization would finally result in poverty in developing nations if proper measures are not taken. (Bhagwati,.2005). References 1. Klein, N. (2000) No Space, No Choice, No Jobs, No Logo: Standing Up to the Brand Bullies. NY: Picador USA. 2. Korten, D. (1995). When Corporations Rule the World . San Francisco: Berrett-Koehler. 3. Korten, D. (1999). Post Corporate World: Life After Capitalism San Francisco: Berrett-Koehler. 4. Bhagwati, J. (2005). Reshaping the WTO. Far Eastern Economic Review ,162 (22): 28 5. Bhagwati, J. (2005). From Seattle to Hong Kong. Foreign Affairs, 84 (7) 6. Bossche, P. (2005). The Origins of the WTO, The Law and Policy of the World Trade Organization: Text, Cases and Materials. Cambridge: Cambridge University Press. 7. Jackson, J. H. (2006). The World Trade Organization: Structure of the Treaty and the Institution, Sovereignty, the WTO and Changing Fundamentals of International Law. Cambridge:Cambridge University Press. Read More