The Role And Relevance Of World Trade Organization - Essay Example

The Role and Relevance of World Trade Organization (WTO) Word count: 2,944 Introduction Trade negotiations have been taking place between governments of many countries through time. From 1947, various trade negotiations have taken place with explicit objective of bargaining among and between the representatives of member countries in the hope of seeking a reciprocated beneficial exchange of concessions. Multilateral trade negotiation is a term that has been generally used to describe the eight multilateral rounds of negotiations that are consistently held under the patronage of the General Agreement on Tariffs and Trade (GATT). According to Capdevila (2008), GATT, which later brought the World Trade Organization (WTO) was a multilateral treaty established with the express intention of helping to reduce the trade barriers that existed between member countries. Presently, 153 countries are signatory to the treaty. It was also mandated to promote trade between signatory countries through trade concessions. The first round of talk was held in Geneva in 1947 and helped to establish the working framework of GATT. The second round was held in 1949 in Annecy, France, and concentrated in tariff reduction among member countries. The third and fourth rounds of trade negotiations were held Torguay, England, and in Geneva in 1951 and 1956 respectively. Both negotiations focused on tariff reduction and accession. The fifth commonly referred as the Dillon round was held in Geneva in 1960-62, and was instrumental in revising the GATT treaty. Both the Kennedy round and the Tokyo round of trade negotiations were held in Geneva in 1964-67 and 1973-79 respectively. The eighth round, known as the Uruguay round was finalized in Geneva in 1986-93 (Sampson 2001). The Doha round of multilateral trade negotiations, which is currently underway, was launched in the Qatari capital in 2001. The current round of talks is mandated to liberalize the global trade and also to bolster development. Though the talks had been scheduled to end by December 2004, it has not been concluded to date due to profound discrepancies that exists between different member nations’ aspirations and interests. During the Uruguay round of talks, member countries saw the need to establish an umbrella body charged with the responsibility of overseeing the rules of trade between member countries (WTO 2008). This marked the birth of World Trade Organization (WTO). World Trade Organization The world Trade Organization, located in Geneva, Switzerland, was established on January, 1995 as a result of the Uruguay round of negotiations. Presently, it is headed by Pascal Lamy, and has a secretariat staff of 625 employees (WTO 2008). It is the only worldwide organization mandated to deal with the rules of trade between member countries. From its inception, it has entered into numerous trade agreements, bargained and signed by the bulk of the global trading nations. These trade agreements are ratified by the parliaments of member nations and help importers, exporters, and producers of goods and services to conduct their businesses in the global market (Balding et all. 2006). The WTO have been credited with helping to establish a strong and flourishing international trading system, which have gone a long way in stabilizing the world through unprecedented economic growth. 153 countries around the world have enlisted as members of WTO, with the bulk (117) of them coming from separate customs territories or developing countries (Allee 2004). These were the countries that were hardest hit by incessant trade barriers from the developed countries, which made sure that they could not achieve economic development for their people. But the WTO has done a lot to change this scenario. Structure and organizational theory of WTO Being an organization that oversees trade agreements between various countries and continents, the decisions made at the WTO are basically taken by consensus of the entire member countries. This perhaps explains the reason as to why trade negotiations take many years to complete – all member nations, big or small, strong or weak, must be comfortable with the decisions reached. The WTO does not allow undue influence or patronage of economically weak nations by the strong developed nations. The Doha round of talks, slated to end in 2004 are still ongoing. The WTO have blamed the delay to end the talks on the differences between the United States on one hand and China and India on the other in regards to the Special Safeguard Mechanism (SSM), an agreement intended to protect the developing nations from having their economies surprisingly flooded with agricultural products from developed nations (Capdevila 2008). The highest authoritative body within the WTO is the Ministerial Conference. The conference, which brings together all the member states, has to meet once in every two years. It is mandated to take conclusive decisions on all matters regarding the multilateral trade agreements. Between the intervals of the Ministerial Conferences, a General Council is mandated to conduct the business of WTO. The council is also comprised of WTO members’ states. Third in the hierarchy are the specialized subsidiary bodies, consisting of councils, committees, and subcommittees, mandated to administer and monitor the implementation of various WTO agreements (WTO 2008). Theories of organizational structure are known to share an ordinary concern for comprehending the behavior of the organization in general and its members in particular, and how the structure hinders or helps the organization reach its objectives. Judging on the structure of the WTO, it can be deduced that the WTO uses a co-activational view to manage its activities. According to Conway et al. (1990), the co-activational view shift the attention from achieving explicit goals to a more vibrant view of the organizational structure by attempting to outline the structure through scrutinizing how organizational members obtain and process resources and information when they engage themselves in achieving the tasks and objectives. This is what happens at the WTO. The members representing the 153 countries that are signatory to the WTO are given equal chances to materials and information, and for an agreement to pass, it must be ratified by all the members. The roles of WTO The WTO’s has been in the forefront in entrenching non-discriminatory treatment by and among its members, pursuing open borders, and committing to transparency in the conduct of its activities. Since its inception in 1995, the organization has worked overtime to ensure that national markets of member countries are opened up for international trade. However, this is done with adequate flexibilities or justifiable exceptions to ensure that nations with weak economies are not hurt by the opening of the trade frontiers (Brus 1995). Almost ten years down the line, the successes of WTO can be seen in the trade agreements that have already been achieved by member countries. The opening of trade barriers have made it possible for member countries to achieve sustainable economic development, reduce poverty, raise people’s welfare, and foster peace and stability (WTO 2008). The WTO has ensured that market openings are accompanied by excellent local and international policies that are capable of contributing to the economic growth and development persistent to the needs and aspirations of member states. Broadly put, the WTO functions to administer WTO trade agreements, provide a forum for trade negotiations, handle and decide on trade disputes, monitor the national and international trade policies, provide training and technical assistance to developing countries, and also cooperate with other international organizations in trade harmonization (WTO 2008). Providing a forum for trade negotiations The WTO has been instrumental in the provision of a forum for negotiating trade agreements that are aimed at reducing impediments to international trade. This has ensured a level playing ground for all member states, thus contributing to development and economic growth. Most trade barriers are often a prerogative of rich nations. According to Rediffe (2003), trade barriers between the rich and poor countries were overwhelmingly responsible for the soaring poverty levels around the world. Going by its estimates, a trade deal that could address the needs of developing countries could spur economic growth and reduce poverty by a staggering 144 million people by 2015. Put otherwise, a good WTO agreement supporting developing countries could bring $290-520 billion income gains to both the poor and rich nations (Allee 2004). There are many trade barriers that WHO had noted. Through the provision of a forum for member countries to negotiate, the organization has been successful in dealing with some of the barriers. Not so long ago, exporters from developing countries had to part with more taxes to get their goods and services into foreign markets than their counterparts in rich nations. The tariffs put on exported agricultural products by the developed countries are very high. According to the World Bank report, it is senseless for rich countries to adopt trade policies that would encourage growth while in the same vein adopting trade policies that were bent on reducing the growth prospects of developing nations (Rediffe 2003). Another notable trade barrier is the agricultural subsidies that the rich nations offer to their farmers therefore making it virtually impossible for developing countries to compete in the world agricultural market. The WTO continues to offer a framework where negotiators from member countries meet to iron out differences in issues like the ones mentioned above. As such, the WTO remains relevant in directing global trends in trading. It has taken an active role in leading negotiations for the reduction or elimination of trade obstacles such as import tariffs. It has also provided member countries with a framework of agreeing on laws and rules governing international trade such as product standards, subsidies, and antidumping rules (Balding et al. 2006). Handling trade disputes WTO has been in the forefront in handling international trade disputes among member countries. These disputes arise from member countries interpretation and application of the various treaties and agreements (WTO 2008). Currently, there are 16 different multilateral agreements to which all the WTO member countries are signatories. As such, different countries may interpret and apply the many agreements differently thus eliciting conflict. Some of the most recent trade disputes that the WTO have dealt with include the issue of agricultural subsidies by rich nations to their farmers, compulsory licensing of drugs to guarantee access to essential medicines, and rewarding of indigenous people who have been used for pharmaceutical discoveries (Sampson 2001). Unlike its precursor, GATT, WTO trade dispute settlement process moves forward routinely, with Appellate Body and panel getting adopted if there is a consensus against them by member countries (Sampson 2001). The effectiveness of WTO in handling international trade disputes have been increased by the rule of negative consensus, which is often backed up by machinery that provides for sanctions and compensation incase of non-compliance. WTO is best known for handling international trade disputes, ranging from corporate tax measures and environment to public health and commerce. Recently, the WTO acted as an arbitrator to a trade dispute pitying the European Commission against the US government over the subsidies for Boeing and Airbus (Doors to WTO 2006). Due to its efforts of handling trade disputes, companies and governments are now assured of conducting their business transactions without the fear that someone somewhere will lay a trap on them. If that happens, the WTO comes in handy to help. This has spurred economic growth within member countries and helped to reduce poverty. According to WTO, one of the central pillars of the multilateral trading system is dispute settlement. This is because it has uniquely contributed to the stability of world economy. If some member states are found to be violating the set trade rules, decisions are taken against them multilaterally. Monitoring of national and international trade policies WTO has been involved in the administration and monitoring the application of agreed WTO’s rules and regulations for bilateral trade in goods, services, and intellectual property rights (Balding et al. 2006). This is a very core duty that goes along way in ensuring cohesion among and within member states. It ensures that the member states national trading treaties does not in anyway interfere with the broader objective of opening boundaries to international trade. Monitoring of trade agreements and policies has brought some improvements on market access conditions of the trading system. The organization has also been involved in reviewing the trade policy and agreements of member nations to ensure that they are in line with its aim of spurring economic development through bilateral trade (Jones 2004). In its evaluation, it has relaxed or done away with agreements perceived to be undemocratic and unfair to some member countries. Evaluation and monitoring of the policies has also ensured coherence and transparency of bilateral and regional trade agreements through constant observation of worldwide economic policy-making mechanisms. Providing training and technical assistance to developing nations Two of the most basic elements of the development dimension of the multilateral trading system are capacity building and technical cooperation (Sampson 2001). The millennium declaration have set targets for the development of a predictable, open, rule-based, non-discriminatory financial and trading system that can be used to address the special aspirations and needs of developing nations, including their tariff and quota-free access markets. The Doha Development Agenda Global Trust Fund for Technical Assistance (DDAGTFTA) was established by the WTO member states and mandated to offer funding to developing countries especially in areas of trade. The WTO technical assistance is specifically designed to enable the developing nations adjusts to the WTO disciplines and rules. The assistance is also meant to improve human and institutional capacity in developing countries to deal with the trade policy concern and issues, facilitate a fuller participation of the beneficiary countries in the Multilateral Trading System, mainstream trade into national development and poverty reduction policies, and enabling the beneficiary countries to effectively participate in the negotiations (WTO 2007). WTO has been in the forefront in building capacity of government officials from the developing countries in international trade matters. WTO has developed a well thought programme and policy for technical assistance, basically providing support on dispute settlements, trade policy and agreements, workshops, notifications, trade facilitation through seminars, e-training, and technical missions. Cooperating with other international organizations in trade harmonization Though WTO is the main player in trade negotiations worldwide, its mandate cannot be effectively sustained if it fails to cooperate with other international trade organizations. The partnerships are primarily done to harmonize the trade agreements that affect various countries in different parts of the world. Examples of international organizations cooperating with WTO includes Third World Network and the World Federalist Movement (Allee 2004) Conducting economic research To support the WTO main activities discussed above, the secretariat at WHO headquarters is charged with the responsibility of collecting and disseminating trade data between different continents, countries, and between the rich and the poor countries (Allee 2004). Relevance and shortcomings Though many countries have continued to rubbish the WTO as favoring the rich countries, its relevance in today’s global trading trends cannot be downplayed. The WTO is on track in achieving its overall goals of promoting free trade and stimulating economic growth in member countries. However, its critics argue that the free trade advocated by WTO has led to a divergence of income levels between the poor and the rich countries. The poor are getting poorer while the rich are getting richer (Jones 2004). Though this argument is valid, overall evaluation will prove that WTO has been able to relax some of the trade barriers that made it difficult for the poor nations to conduct business with rich nations. Though WTO is still relevant in the world today, it needs to work on a few modalities to make it even more resilient. First, it needs to establish a level playing ground in all trade discussions that will portray it as an impartial world body, which is not biased towards Multinational Corporations and rich countries. Presently, there is a feeling that smaller countries are being harmed as they have less negotiation powers. Secondly, WTO needs to come up with a way of making sure that developing countries receive real benefit from the Uruguay round of talks. Presently, market access for commodities from developing countries continues to be denied. Thirdly, WTO needs to address the issues of environment and labour relations, which some member countries think they are being steadfastly ignored. Also, the WTO needs to remodel its decision making structure to make it more appealing to the member states. Some member nations believe that the structure is complicated, unrepresentative, ineffective, and non-inclusive (Jones 2004). If these shortcomings are corrected, the WTO could stand a better chance of fulfilling its goals and aspirations. Conclusion This paper has proved that the role of WTO cannot be underestimated if the world has to achieve unprecedented levels of economic growth. Trade is one of the pillars to sustainable economic growth. The WTO has been in the forefront in facilitating numerous trade agreements, bargained and signed by the bulk of the global trading nations. The WTO has also been credited with helping to establish a strong and flourishing international trading system, which have gone a long way in stabilizing the world through unprecedented economic growth. More fundamentally, the WTO has been in the forefront in entrenching non-discriminatory treatment by and among its members, pursuing open borders, and committing to transparency in the conduct of its activities. As already mentioned elsewhere, its roles are many and includes providing a forum for trade negotitiations, handling trade disputes, and monitoring of national and international trade policies. These are very important roles. But for WTO to be credible, it must shake off the perception that it lacks the power to reign in powerful Western nations and make them conform to international trading standards. To many in developing nations, the WTO is just another puppet for rich nations around the world. WTO must be ready to work overtime to prove such critics wrong. References Allee, T 2004. “The Hidden Impact of the World Trade Organization on the Reduction of Trade Conflict.” Paper Presented at the Annual General Meeting of the International Studies Association, Quebec, Canada. Retrieved from [12 November 2008] Balding, C., Chapman, J., & Wehrenfennig, D 2006. Organization Matters to Institutions: Understanding the United Nations and World Trade Organization as co-activational and co-integrational organizations, London: Routledge Brus, M 1995. Third Party dispute settlement in an Independent world: Developing a Theoretical Framework. Martinus Nijholf Publishers. 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Retreived from http://www.faqs.org/abstracts/Political-science/World-trade-disputes-settlement-and-the-exhaustion-of-local-remedies-rule.html > [12 November 2008] Rediffe, K 2003. Remove Trade Barriers, World Bank Tells Rich Nations, Rediffe.com. Retreived from [12 November 2008] Sampson, G.P 2008. The role of the world Trade Organization in global governance. United Nations University Press. Retreived from Read More