World Trade Organization. Origins And Characteristics - Essay Example

? World Trade Organization and Section # of World Trade Organization a) Outline the origins anddefining characteristics of the World trade organization (10 points). The General Agreement on Tariffs and Trade (GATT) was created in 1948, and World Trade Organization (WTO) is a successor to the old organization. The WTO’s membership is more than GATT, and it has a larger subject base. However nevertheless, GATT was the institution that multilaterally established the underlying principles of its successor organization. Initially, 50 countries negotiated in order to create an International Trade Organization (ITO) which would work along side the World Bank and International Monetary Fund (IMF), and would be sponsored by The United Nations. Simultaneously, 23 countries (11 of which were developing nations) decided to negotiate on tariff reductions and also to adapt some of the ITO rules, these agreements are called the GATT. The ITO remained subject to ratification to be accepted by national legislatures, but the USA denied due to Congress opposition, and thus GATT remained in effect just as the ‘provisional’ agreement. Seven trade rounds were completed under GATT, and trade agreements were initiated which benefited the developing countries without reciprocal offers. The GATT agreements were extended in the Uruguay Round in 1986, under which new areas were added to the services trade and intellectual property rights were included. Furthermore, a new dispute settlement system had to be redesigned and a new trade organization had to be established to replace the provisional GATT. In the year 1995, the ‘Marrakesh Agreement’ established the WTO, and the Uruguay Round agreements were implemented and by 1997 the additional agreements were also implemented which covered the financial services and the telecommunication services. Furthermore, the defining characteristics of the WTO are as follows (Ministry of Commerce and MPDF, 2005, 11-16): Transparency is the primary principle, since business people are most concerned with the environment they operate in. Thus, it is a requirement for the WTO member to publish all laws and regulations transparently which may affect domestic or international trade in any matter. Non-discrimination principle ensures that the goods of any country must not be differentiated against, and therefore no ‘most favored nation’ treatment shall not be provided, and neither the local goods should be discriminated. Progressive trade liberalization principle applies because WTO is not a free-trade organization, therefore a government can increasingly open its market to foreign competition to the extent it finds appropriate, independently of what is prescribed by the WTO agreements. Special and Differential treatment principle ensures that developing nations receive easier terms and agreements, and thus they are allowed more time for implementation, and the stricter rules applied on the developed nations may be removed from the agreement of the poorer nations, in order to help them take benefit of being WTO members receiving special treatment. b) An imperfect World Trade Organization is better than no world trade organization. Discuss with reference to ongoing protectionist policies and the impact of these in the relation of developed economies and lesser-developed economies (40 points). WTO is an organization that was formulated to help and benefit its members, its system of rules, principles and obligations are in place to protect its member nations, which also comprises of the economically less powerful nations, since WTO helps governments of such nations to devise programs which trigger economic reform. The multilateral trade framework of the rules enacted also help nations in domestic policy making, they do not enforce trade policies but help governments in establishing developmental policies which are based on open and competitive markets. Regardless of the initial aim, WTO has been criticized for being unfair and hurting to the developing economies, and is considered more of a puppet of the powerful nations to manipulate the policies of the weaker. Some analysts suggest that the developing nations might even be better off without the WTO, and this approach is further deepened by the NGOs who claim that the WTO and the Doha Round negotiations promote a global trading system which is unfair to the poor and exploits the poor of the weaker nations especially. The criticisms with regards to WTO are very diverse, comprising of exploitation and unfairness accusations and also extending to issues of environment, labor and human rights. According to a formal model study conducted by Fung, Herrero and Siu (Fung, Herrero and Siu, 2009) it was concluded that the powerful nations would always have an incentive to exploit the poorer nations, but these weaker nations can use the non-discriminatory principle as an advantage to them (which also includes the ‘most favored nation’ clause) and protect themselves from powerful exploitation, but as is defended by the prominent scholars of the GATT and WTO, that the rich nations always have an incentive to exploit the poor nations, with or without the existence of WTO, but it is the principles of WTO today which provide protection to the poor nations through its non-discriminatory policies such that they have a stand in the global trade market, they are favored in a way that they can export their goods to the richer nations on reduced tariffs and at the same time protect their domestic industry since the agreements made with poorer nations have easier terms and rules, and thus they help to mitigate some of the influences of the developed nation’s exploitation. WTO provides help to the poorer nation by enacting rules such as countervailing and anti-dumping policies, and provision of subsidies to the poor nations to develop their export base, and providing them access to the international markets which does not exist for them without WTO, thus leverage is given to the poor nations. The application of the WTO rules in the textile and apparel sector and the agricultural sector have been strengthened to help poorer nations, since these industries are crucial to them. The WTO also comes in to support nations in domestic policies, it helps poorer nations to establish deals with the richer ones on common grounds, in order to prevent exploitation, since according to new WTO protectionist principles, the rich nations are also bound by ‘reciprocal obligations’ which make them act fairly in their dealings with the developing nations. The WTO also provides access to developed markets under the Generalized System of Preferences (GSP) which are non-reciprocal trade preferences helping the poor nations, which would have been bound by the MFN tariff rates if the WTO was not in place to protect them. Furthermore, the developing nations have been provided with flexible agreements, since they need more time for the implementation of the obligations, many provisions also include technical assistance to the poorer nations to meet new obligations, and in special circumstances, the WTO agreements allow poorer nations to act contrary to the principles of the treaty in order to protect themselves, such as usage of quantitative restrictions in trade (Inquit, 2011). It is not claimed that the WTO generally always benefits the poorer nations, but it can certainly be argued that on the basis of its principles and policies, its existence protects the developing nations to some extent, such that they are not as vulnerable as they would have been if the WTO did not exist to provide special and differentiated preference treatment to them. Apart from the protection, the developing nations can use the time leverage provided to them to speed up their developmental process and compete with the developed nations, therefore WTO is an umbrella which does provide developing nations with some sort of assistance against the powerful nations which have an incentive to exploit the poor under any circumstances, regardless of the existence of WTO. References Inquit (2011) The WTO and Developing Countries. Retrieved February 22nd, 2011 from Fung. K C, Herrero. A C and Siu. A (2009) ‘Developing Countries and the World Trade Organization: A Foreign Influence Approach’. Retrieved February 22nd, 2011 from Ministry of Commerce and MPDF (2005) Cambodia and WTO: A Guide for Business- Chapter 4. Retrieved February 22nd, 2011 from Read More