Is WTO a Necessasity for Global Trade - Essay Example

College: The W A Necessity for Global Trade Introduction The WTO (World Trade Organisation) is the sole international organisation that deals with the global trade rules between countries. The main function of WTO is ensuring that global trade flows predictably, smoothly, as well as freely as possible (Jackson 1994). The organisation can be looked at in several ways. First, it is an organisation, which fosters opening of trade. Second, national governments negotiate agreements on trade through the forum. Thirdly, national governments settle diverse trade disputes through it and finally, it operates a trade rules’ system. Essentially, WTO is an effective place in which the member governments attempt sorting out various trade problems they encounter with each other (Hoekman et al nd). The WTO entails a set of rules: the core of the agreements of WTO, which were negotiated as well as signed by majority of the trading nations in the world, forms its basis of operations. The agreements provide the member governments with legal ground-rules for smooth international commercial activities. The agreements are essentially contracts, which bind national governments to stick to their policies of trade within agreed limits and boundaries (WTO 2012). Although the agreements have been negotiated as well as signed by national governments, the objective is helping goods and services’ producers, exporters, as well as the importers to carry out their business operations while permitting governments to meet the environmental and social objectives (Aaronson 1996). The overriding purpose of WTO system is to aid trade to flow freely so long as it has no undesirable side effects since this is imperative for the overall well-being and economic development. That partly implies removal of obstacles. It also implies ensuring that individuals, governments, and companies know the existing trade rules across the globe as well as giving them confidence there won’t be sudden alterations of the policy. In simple terms, the rules must be predictable and transparent (Jackson 1994). The WTO has many benefits but there are also some critics to its operations and this forms the basis of this paper. Thus, the paper shall examine the functions of the WTO and its achievements and gauge them against the criticism presented by those opposed to its operations to help in giving a comprehensive conclusion regarding whether the WTO is a necessity for global trade or not. Basic Information about the WTO The WTO is based in Geneva, Switzerland. It began its life on January 1 1995 though its system of trading is about fifty years older. The General Agreement on Tariffs and Trade (GATT) has since 1948 provided the system with effective rules. GATT was born by the General Agreement as an unofficial, de factor global organisation. This unofficial defector organisation evolved via a number of rounds of negotiations as members tried to compile an effective plan for their operations. The largest and last GATT round, which established the WTO, is the popular Uruguay Round that lasted between 1986 and 1994. While GATT had chiefly dealt with essential trade in goods, WTO and its accords currently, cover the trade in services, as well as in traded designs and creations and inventions (the intellectual property). By 10 February 2011, the body (WTO) had a membership of 153 nations while its budget for 2011 amounted to 196 million Swiss Francs. The head of WTO is Pascal Lamy (the director-general) who leads its 640 secretariat staff (WTO 2012). Functions of WTO The body is run and managed by its member state governments. All the major decisions of WTO are reached upon by its membership either by their delegates or by ambassadors (who meet frequently in Geneva) or ministers (who typically convene a meeting at least once for every two years). While the member states drive it, the WTO cannot function effectively without its Secretariat coordinating its activities (Aaronson 1996). The WTO’s Secretariat employs more than 600 staff, with its experts- economists, communication experts, lawyers, and statisticians- assisting the members of the organisation on a day-to-day basis to ensure that negotiations of trade progress smoothly, and ensure the correct application and enforcement of rules of the international trade. There are several ways of examining the WTO. It is an international body interested in trade liberalisation. It is also a forum for the international governments to negotiate effective and viable trade agreements. Moreover, it is an effective place for settlement of disputes in trade. This section will examine the different functions of the WTO as provided by WTO (2012) and other scholars and give illustrations where viable. Trade negotiations: the agreements of the WTO cover intellectual property, goods, and services. The agreements spell out liberalisation principles as well as the permitted exceptions, which include the individual nations’ commitments towards lower custom tariffs as well as the other barriers to trade, and opening and keeping open services markets. In addition, the trade negotiations set the procedures for disputes’ settlement. These agreements are however not static as they are regularly renegotiated with new agreements having the potential of being incorporated into the package. Several new agreements are being negotiated under Doha Development Agenda, which was launched in November 2001 by the trade ministers of WTO member states in Doha, Qatar (WTO 2012). Essentially, WTO is an effective platform on which the member governments go and try sorting out their problems of trade, which they encounter with each other and the first step of solving such problems is by talking. As an international body, the WTO was born from negotiations, and all its operations are the outcomes of negotiations by the members. The bulk of its current works is generated from the 1989-1994 Uruguay Round negotiations as well as the earlier negotiations under General Agreement on Tariffs and Trade (Alston et al 2002). Currently, WTO hosts the new negotiations under Doha Development Agenda, which was launched in 2001. In circumstances in which nations face barriers on trade and wanted them to be lowered, negotiations have assisted in liberalizing trade. However, the WTO’s obligation is not trade liberalisation only as its rules in some circumstances help in maintenance of barriers to trade e.g., for consumers’ protection or prevention of spreading of disease (Hoekman 2002). Implementation and monitoring: the agreements of the WTO require governments making their trade policies as transparent as possible through notifying the organisation about the laws in force as well as the adopted measures. Several WTO committees and councils seek ensuring that these necessities are being followed effectively and that the agreements of WTO are being implemented properly. All the members of WTO must undergo some periodic scrutiny concerning their trade practices and policies with each review containing some reports by the concerned nation as well as the WTO Secretariat (GATT Secretariat 1993). Settlement of disputes: the procedures of the WTO in resolving trade quarrels or disputes under Dispute Settlement Understanding has been crucial in enforcement of the trade rules and thus for ensuring smooth flow of trade. Nations bring disputes to WTO if they perceive their rights are being infringed upon under the agreements. Some specially appointed independent specialists who base their interpretations on the accords as well as the commitments of the individual countries usually do the judgements on such disputes. In essence, trade relations regularly entail conflict of interests and thus trade agreements, including the ones painstakingly negotiated in WTO system, frequently need interpretation. The most harmonious means of settling such differences is via some neutral procedure, which is grounded on agreed legal foundations. Actually, this is the purpose behind the process of dispute settlement integrated into the agreements of the WTO (Aswathappa 2010). Building trade capacity: the agreements of the WTO consists of special provisions for the developing nations, including longer periods of time for implementation of commitments and agreements, measures of increasing their opportunities of trade, as well as support for helping them in building their capacity of trade to handle disputes as well as to implement some technical standards. WTO arranges numerous technical cooperation missions towards the developing nations annually. In addition, it holds several courses every year in Geneva, Switzerland for government officials. The assistance for trade aims at helping the developing nations develop their infrastructure and skills required in expansion of their business and trade (Hoekman 2002). Outreach: WTO maintains regular discourse with the parliamentarians, non-governmental organisations, media, general public, as well as the other international organisations on various WTO aspects and the continuing Doha negotiations, to enhance increasing awareness and cooperation of the activities of the WTO (Aswathappa 2010). What the WTO Stands for Agreements of the WTO are complex and lengthy as they are legal contents that cover a wide variety of activities. However, several simple and fundamental principles run across all these documents with the principles forming foundation of multilateral system of trade. To achieve its mandate as an organisational body, WTO fights for non-discrimination in which a nation has no power of discriminating against one or several partners of trade, between foreign and own products and services or between nationals. The WTO also advocates for more open trade-with lowering of barriers of trade among nations being the most obvious mechanism of encouraging trade. Some of the main barriers of trade that WTO tries to eradicate include the tariffs or custom duties as well as such measures as quotas or import bans, which restrict quantities selectively (GATT Secretariat 1993). WTO is also in the frontline in ensuring predictability and transparency of trade operations among member states. Foreign investors, governments, and companies should have the confidence that barriers of trade are not raised arbitrarily. With predictability and stability, jobs are created, investment encouraged, and consumers can enjoy competitive benefits fully in terms of lower prices and choice (Keck & Sikkink 1998). The body also fosters more competitiveness in global trade operations. It discourages such unfair practices as dumping products and export subsidies at below cost in order to gain more market share. Such issues are very complex and thus the WTO rules try establishing fair or unfair issues, how the governments can respond, especially by charging the additional import duties, which are calculated as compensation for the damage caused by the unfair trade activities (Hoekman et al nd). The WTO also aims at making trade to be more beneficial to the less developed nations. Actually more than 75 percent of the membership of WTO is developing nations and nations in transition towards market economies and thus the body aims at giving them greater flexibility, more time for adjustment, as well as special privileges. The agreements of the WTO give them some transition periods in order to adjust towards the more difficult and, perhaps, unfamiliar WTO provisions (Alston et al 2002). Finally, the body aims at protecting the environment by upholding corporate social responsibility and sustainable practices in international trade. The agreements of the WTO allow its members to take effective measure for protecting not only their environment but also the public health, plant health, and animal health. However, such measures require being applied in similar manners to both foreign and national businesses. In simpler terms, the members are not allowed to use measures of environmental protection as means of disguising their protectionist policies (Charnovitz 2002). Criticism of the WTO This paper will not be complete without looking at the criticisms directed against the WTO and its operations across the world. One of the criticisms is that the WTO prioritises commercial and trade considerations above all the other values (GATT Secretariat 1993). The rules of the WTO generally needs domestic rules, regulations, and laws designed to further consumer, worker, health, environmental, human rights, animal protection, health, or the other non-commercial interests undertaken in the minimal restrictive approach possible. Trade is almost never subordinated to such non-commercial concerns. It also undermines democracy as its rules and regulations shrink available choices towards the democratically restricted governments drastically, with violations most likely punished with some harsh penalties. WTO actually flaunts this overriding of the domestic decisions concerning how the economies and corporations ought to be organised and controlled respectively. Under the rules of the WTO, once a commitment is made towards liberalisation of any trade sector, it is usually very hard for reversal. In its paper about its benefits, the WTO says that, “Quite often, governments use the WTO as a welcome external constraint on their policies: 'we can't do this because it would violate the WTO agreements.” (Keck & Sikkink 1998) Thirdly, the WTO is accused of promoting global trade very actively as opposed to its responsibility of just regulating. The rules of the body are highly biased to facilitate global trade at the cost of the efforts of promoting local economic policies and development, which move countries, communities, as well as regions in greater self-reliance direction (Alston et al 2002). Another criticism is that the body hurts third world nations. The WTO rules are accused of forcing the third world nations to open their economic markets to the rich nations’ multinationals, as well as abandon the efforts of protecting the infant domestic industries. In the agricultural sector, opening of the foreign imports, which is going to be imposed upon the developing nations, will catalyse some rampant social dislocation of several millions of the rural populations (Aaronson 2001). The body is also cited of eviscerating the precautionary principle. Its rules generally block nations from retaliating to the potential risk. However, potential harms to the environment or human health could be solved by requiring probabilities before the governments as moves of curbing the diverse effects (Alston et al 2002). WTO is also accused of squashing diversity. Its rules set up environmental, international health, as well as other standards as global ceilings via a harmonisation process. Nations or even cities and states can only surpass them by conquering high hurdles. The other criticism is that the body carries out its operations in secrecy. The tribunals of WTO rules on legality of the national laws but do their work behind some closed doors. The other factor is that the body is accused of limiting the ability of governments to utilise their purchasing cash for environmental, worker rights, human rights, as well as the other non-commercial purposes. Generally, the rules of WTO state that governments have the ability of making purchases based on cost and quality considerations only. WTO does not allow the imposition of bans on the imports of goods manufactured with child labour. Generally, its rules forbid discriminative treatment of goods by nations based on their production nature. This is irrespective of whether such goods were made with some brutalised child labour, workers exposed to dangerous toxics and emissions, or regardless of species protection. Finally, critics argue that the WTO is engaged in legitimisation of life patents. The rules of WTO allow and in some situations need patents or some similar exclusive life forms’ protections (Aaronson 2001). It is within the WTO powers to fix some of the above mentioned problems like its penchant for secrecy to streamline its operations. However, it may be plainly impossible for potential fixation of some core problems mentioned above such as the prioritisation of the commercial and trade across the world over the other values, bias against the local economies, and the constraints on the democratic decision making since they are highly inherent into the body itself (WTO 2012). WTO as an Essential Tool for Global Trade Despite the numerous criticisms gauged against the WTO, this paper has established that the body is a necessity in the modern day global trade since any good thing has its challenges and the WTO cannot be an exception. The World Trade Organisation cannot be termed as a mere transformation of the GATT into an international formal organisation. The body covers a broader purview, which consists of subsidies, food safety, intellectual property, as well as other policies, which were only solely subject of the national governments. WTO also has a very strong mechanism of dispute and conflict settlement making in very crucial in the modern day trade operations (Hoekman et al nd). Just like under the GATT, WTO panels weigh any trade conflicts but they must adhere to strict schedules of time. Furthermore, in contrast with the GATT procedure, no nation can delay or veto the panel decisions. For instance, if the US environmental protection laws (such as the laws requiring standards of gas mileage) were established as being de facto impediments to trade, then the US requires taking action. The nation can either alter its law, compensate other party for the lost trade in case it maintains such a law, or fail to do something and face retaliation (Aswathappa 2010). Critics of WTO should realise that the body had received over 300 dispute cases in 2006 since its inception in 1995. The cases have increased so much due to the expansion of global trade, which calls for effective dispute-settlement systems (Javelosa & Schmitz 2006). This implies that there is need of an independent and free international body for regulating trade operations across the world (Butler & Hauser 2000). The critics may argue that the third world countries are discriminated against by the WTO policies, but the fact remains that there must be interests in joining any body and thus we cannot blame the developed nations for appearing like dominant. For real, it cannot be possible for a nation like Somalia to have the same economic operations with China or US. Most of the third world nations thus end up creating markets for the commodities from developed nations. This has its advantage in that such products must meet the international standards and thus dumping could be avoided largely. Economists and policy makers have long realised that social and trade regulations can intersect. Even if the US never banned slave trade until 1807, the nation was among the pioneers of banning commodities manufactured by such forced labor (infamously referred to as prison labour) in section 51 of the 1890’s Tariff Act (Aaronson 2001). The provision impacted several trade agreements, which followed including the GATT that has a similar provision in its governing rules and regulations. However, in 1970s, the public officials started admitting that such domestic regulations as safety and health regulations could also distort trade consciously or unconsciously (Keck & Sikkink 1998). Therefore, the WTO covers this loophole by providing internationally accepted rules and regulations to govern trade operations. Such efforts aimed at including the rules and regulations governing such regulations within the GATT purview as well as in the other agreements of trade. The process commenced with GATT Tokyo Round negotiations held between 1973 and 1979 but came to realisation during the famous Uruguay Round. The policy makers extended the trade agreements’ turf to incorporate the rules governing the once domestic policies like the intellectual property, subsidies, and food safety (GATT Secretariat 1993). All these efforts show that the world cannot risk going back to the round tables but should rather focus on improving the present WTO to be a viable and effective body for all nations and cultures across the world. Conclusion In conclusion, this paper agrees that the WTO is a necessity to the modern day global trade, which has become too competitive in different aspects. This competitiveness have led to some compromises in business and trade operations and thus the need for a neutral, independent, international body to regulate the trade operations without fear and favourism. Although critics hold that the body does not have the interests of the developing nations at heart, it is imperative to credit the body since the world is in itself political and political factors must come into the play in such operations. However, the body has more to do to ensure that the third world nations are not subjected to some international policies, which only present them as target markets for the products and services from the developed nations, which could enjoy the provisions of the body as they have financial powers. Thus, if we rule out the WTO as a regulator of international trade, which other body will fit its position? References Aaronson, S 1996, Trade and the American Dream: A Social History of Postwar Trade Policy, University Press of Kentucky, Lexington, KY. Aaronson, S 2001, Taking Trade to the Streets: The Lost History of Efforts to Shape Globalisation, University of Michigan Press, Ann Arbor. 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