World Trade Organization Information - Essay Example

World Trade Organization Origin On May 19, 1948, the General Agreement on Tariffs and Trade or GATT was created. This was not an international organization but an inter-governmental treaty. This provided the structure for the conduct of international trade. But this expanded and grew yearly and in January 1995, in the Uruguay Round of Multilateral Trade Negotiations (1986-94) expanded on the GATT and created the World Trade Organization or WTO. The World Trade Organization was created with a goal and ultimate objective set in mind. Its ultimate goal is to improve the welfare of peoples in the member countries. The purpose is to aid trade flow efficiently, lawfully as well as predictably. It has nearly One hundred and fifty one member states, which account for 97% of world trade (Ben-David p15). The legal documents of the WTO explore this idea and the individual obligations of member countries. History: From 1947 until Jan. 1, 1995, when the WTO formally came into being, the main body for settling international trade disputes was operated under the General Agreement on Tariffs and Trade. Before World War II the United States had entered into a series of bilateral trade negotiations. In the 1920s and 1930s, a series of protectionist measures, including congressional approval of the Smoot-Hawley tariff law, harmed international trade and, experts say, deepened the worldwide recession. After the war, the United States and other export-dependent countries tried to establish a trade body parallel to emerging international financial institutions, such as the World Bank. Efforts to form an international trade organization foundered, with many countries raising the same objections later leveled against the WTO: fear of lost sovereignty. In 1947 in Geneva, however, 23 nations formed the GATT. Until 1994, the GATT was the forum for resolving trade disputes and launching negotiating efforts. There were eight trade rounds in 50 years, and they resulted, according to the U.S. trade representative's office, in a 15-fold increase in international commerce. But the GATT came under increasing criticism from nations and exporters who said it was too cumbersome and its settlement process was too open-ended. Under the GATT system, the losing party could simply block a decision. As long as no one did it, the system worked...but more and more started doing it, in 1986, when The Uruguay Round was launched in Punta del Este, 74 nations attended the conference. The final agreement, reached in 1994, was designed to reduce tariffs and trade barriers by 40 percent. It also, nearly 50 years after the idea was broached, created the WTO to oversee international trade. Operation How and Where World trade organization operates in the following functions: It administers organization trade agreements, Handles trade disputes. Monitors national trade policies. Provides technical assistance and training to developing countries, cooperates with other international organizations.( www.geocities.com/letoconsulting/wto_accession.htm) Serves as a forum for trade negotiations. The World Trade Organization is designed to create the rules involved with trade. These trading rules include all countries, not just the US, and can therefore be a little tricky at times. "The WTO establishes a structure for trade policies; it does not define results" (Bagwell &Staiger p80). As we can see, the rules of trading are simply set as guidelines and cannot guarantee a certain outcome for each individual agreement between countries. There are five main rules that the WTO depends on to operate smoothly on a daily basis and they are as follows: unbiasness, reciprocity, enforceable commitments, simplicity, as well as security valves. 1. The WTO shall make possible the implication , administration as well as operation, and promote the objectives, of this Agreement along with the Multilateral Trade Agreements, and shall also give the structure for the implementation, administration as well as process of the Plurilateral Trade Agreements. 2. The WTO shall give the opportunity for negotiations amongst its Members regarding their multilateral trade relations in issues that are dealt with in the agreements in the Annexes to this Agreement. The WTO can also give a forum for more negotiations between its Members on the subject of their multilateral trade relations, along with a framework for the implementation of the outcome of such negotiations, as might be determined via the Ministerial Conference. 3. The WTO shall handle the complete and clear comprehension of rules as well as procedures that govern the resolution of disputes (which is often referred to as the 'Dispute Settlement Understanding' or more commonly known as 'DSU') in Annex 2 to this Agreement. 4. The WTO shall manage the Trade Policy Review method (which is commonly known as TPRM) provided for in Annex 3 to this Agreement. 5. With an analysis to achieving improved reliability in global economic policymaking, the WTO shall assist, as suitable, by means of the International Monetary Fund and with the International Bank for Reconstruction along with Development and its associated agencies. WTO-Governing Policies Open Trade The trade policy of a country or a group of countries where all legitimate goods and services can be imported and exported, with or without tariffs. Free Trade: The trade policy of a country or a group of countries which impose no tariff or non-tariff restrictions on the trade of legitimate goods and services; the trade transactions occur purely as a result of demand and supply forces; the government's role in augmenting transaction costs remains at zero level. Fair Trade The trade policy which recognizes the role of unequal market powers of trading partners and seeks to find equitable trading arrangements to ensure that the powerful trading partners do not take undue advantage of the relatively less powerful partners. Balanced Trade The trade mechanism of a country which seeks to allow export-import operations with due regard to broad-based economic development strategy combined with socioeconomic considerations. Also, the trading methods are not influenced by the compulsions of foreign debt or mobilization of foreign exchange reserves for the national account. Optimal Trade The trading policies of a given country or group of countries which seek to optimize a set of financial and socio- economic objectives, taking into account their current and future resources, as well as economic and social factors; the roles of the market influences are partially augmented to achieve desired Objectives; this approach presumes a great deal of information availability and processing on the part of a central agency which steers the systems of trade for the country. Protected Trade Trade policy of a country or a group of countries which adopt tariff and/or non-tariff trade barriers affecting the transactions resulting from the market forces in order to protect domestic industry, or foreign exchange reserves, or retain a closed economy to perpetuate undisturbed state control of resources and institutions. Managed Trade Trade policy which allows direct or indirect state intervention in order to steer the inflow and outflow of goods and services or maintain a level of foreign exchange reserves or achieve a set of desired objectives with trade interventions; these interventions coexist with the role of the market and could possibly play a catalytic role. Sustainable Trade This is a trade policy that takes into consideration not just short-term benefits as well as costs but also makes sure that trade operations can be maintained for extremely long time horizons with no interruptions caused as an outcome of trade activities. The continuation as well as the role of a accountable governing entity is assumed here, as markets themselves do not generally have the information as well as foresight required to achieve the integration of (a) economic along with environmental considerations, and, (b) factors along with impacts related with markets as well as missing markets associated with different resources, products and services (as well as services of nature).One more alternative concise definition of Sustainable Trade is the trade system which makes sure that sustainable development continues. (The latter defined according to rather standard pragmatic norms) (Ben-David p 56). Enforcement Mechanism "The rule of law fosters certainty, predictability and stability in the world trading system. The presence of these features allows countries to secure the benefits of trade expansion more rapid rates of economic growth and job creation. WTO member countries are obligated to follow the rule of law in commerce, which requires them to adopt more transparent, less arbitrary laws at home. The WTO system offers a way to peacefully settle disputes in a more consensual, cooperative and quasi-judicial setting - characteristics that are the hallmark of all democracies Decisions by WTO panels and the appellate body cannot override U.S. federal, state or local laws. WTO panels may only make recommendations The WTO has no enforcement authority. It cannot impose fines, levy sanctions, modify tariff rates or change the laws of any country. The only sanction for a violation of WTO rules is that affected WTO member countries may, in some cases, impose retaliatory measures on the trade of the country that violates the rules. WTO member countries, including the United States, implement panel decisions not because of the coercive power of the WTO, but because they think their people will benefit from rules that promote mutual economic gains through trade liberalization". (http://trade.businessroundtable.org/trade_2006/wto/decision.html) WTO- Dispute An interesting case by means of systemic implications that was based on the concern of the use of hormones in beef. US beef producers make use of hormones to speed up the growth of cattle. Six specific hormones, a few or all of which are utilized in North America for this purpose, are forbidden in the EU. US beef producers have used hormones for ages, in quantities that have been proved to be safe for human consumption by the US authorities. In April of 1996, the US filed an appeal for the concern of a panel. Both argued extensively that the EU ban on the use of hormones restricted exports of meat, as well as was irreconcilable with additional things, the provisions of the WTO agreement on sanitary as well as phytosanitary measures. A panel established that the EU ban was not in agreement with all the requirements that members usually base their sanitary procedures on international values (Article 3.1 of the SPS agreement), have a technical reason for using national norms (Article 3.3 SPS), make use of risk assessment measures that take into consideration methods developed by means of the significant international organizations (Article 5.1 SPS) and keep away from the use of arbitrary or unjustifiable distinctions which eventually always results in bias or a hidden constraint on international trade (Article 5.5 SPS). The Appellate Body upheld the panel's judgment regarding the EU import prohibition was not in agreement with Articles 3.3 as well as 5.1 of the SPS agreement, however reversed the verdict that the import prohibition was not in agreement with Articles 3.1 along with 5.5. It also reversed the burden of proof in disputes under the SPS agreement, judgment that it is up to the complainant to show that there is no logical basis for a measure (as conflicting to forcing the respondent to exhibit the logical basis for its rule). In this case, exactly like in others, the Appellate Body exposed that it is more liable to permit governments to disagree that measures are necessary to accumulate national objectives than panels are. The time period for execution of the verdict was set at 15 months by means of arbitration. Just before the ending of the given time period, the EU informed the DSB that it would not be able to meet the terms. Political constraints that reflected a strong lobby in the EU that were against the use of hormones in meat production made it unattainable. In June 1999, the complainants sought after approval from the DSB to retaliate on imports worth US$202 million as well as C$75 million, correspondingly. The EU asked for the arbitration on this, as well as the original panel afterward determined the suitable levels to be US$116.8 million, along with C$11.3 million, correspondingly. The DSB approved retaliation in these amounts. The Hormones case is an instance of the kinds of disputes that can be anticipated to become a lot common in the future, that is, cases regarding differences in regulatory regimes as well as risk concerning attitudes. It is also interesting in that there is extensive agreement that hormones are not a health threat. In that realm the case was an uncomplicated one-there is a practical scientific agreement on the science aspects. Conclusion The above given overview of WTO gives a clear picture of the way it functions. From past till present it has faced many challenges, but it continues to fulfill its objective and functions. The WTO at present seems to be regulating all kind of trade. It has helped resolve many disputes, and made trade lawful and efficient. It tends to enforce rules so that conflicts do not rise among countries during trade. Within the above description of the World Trade Organization you can see how the WTO regulations and the meetings it holds effects every nation differently, depending on what each nation needs, has and wants to do. National sovereignty is bent for the equality of trading and international trading is being regulated by the WTO. Work cited Bagwell, K. and Staiger, R; 'A Theory of Managed Trade', American Economic Review, 1990 pp 80: 779-95 Ben-David, D; Free Trade and Economic Growth, Cambridge, Mass.: MIT Press, forthcoming 2001 p 10-56 http://trade.businessroundtable.org/trade_2006/wto/decision.html 16 November 2007 http://www.idrc.org.sg/en/ev-41449-201-1-DO_TOPIC.html retrieved on 16 November 2007 www.geocities.com/letoconsulting/wto_accession.html retrieved on 16 November 2007 Appendix Fig 1.1 WTO organization chart Key Reporting to General Council (or a subsidiary) Reporting to Dispute Settlement Body Plurilateral committees inform the General Council or Goods Council of their activities, although these agreements are not signed by all WTO members Trade Negotiations Committee reports to General Council Read More