World Trade Organization: Understanding The Basics Of WTO

By | January 13, 2014

“The WTO has one of the most impressive records in global economic governance, by promoting trade liberalisation and economic development.”

Anna Lindh

World Trade Organization: Understanding The Basics of WTO

World Trade Organization: Understanding The Basics of WTO

The world has transformed into a global workplace and most of the countries operate as open economies. Every international activity has an impact over the global economy. In a similar manner, global trades affect every aspect of your life. There are some questions that often comes to find like who is responsible for a fair trading practice between different nations? Who has the authority to decide the rules of international trades?

World Trade Organization is the answer.

The World Trade Organization is the organization that decides trading rules between different nations. WTO comprises of a set of agreements (WTO Agreements) duly signed by its members and the WTO agreements are ratified in its parliament. The main function of World Trade Organization is to allow manufacturers of goods and services to conduct their business at a global level.

What is the World Trade Organization?

WTO started its operations on January 1, 1995 and the GATT (General Agreements on Tariffs and Trade) established it. GATT came into origin after the end of World War II and its main purpose was to facilitate global trades at reduced tariffs. GATT had a principle clause, Most Favoured Nation (MFN), which was assigned to a country by another and offered privileged trading rights to the selected country.

The World Trade Organization became the world’s leading trading body in 1995, hence replacing GATT in the process. WTO worked in accordance with the trading regulations that were set during 1947 to 1994 in GATT for multilateral goods trade. Later, WTO developed regulations for intellectual property rights for the protection of business ideas, designs, concepts, and patents.

What is the purpose of WTO?

The WTO operates with one sole purpose- to commence global trades freely, smoothly, and legally. There are 159 members in WTO, who trade according to the legal international commerce rules defined by the WTO. The WTO ensures economic peace and stable trading standards in international trading. Most of the countries have made these rules a part of their national legal system. Any local or national company working at an international level has to work in accordance with these rules. If a company is planning to invest in a foreign country, they have to follow the WTO rules for setting up their new office. According to the statistics, the WTO governs more than 97% of the overall international trades.

How does the WTO operate?

The WTO operates according to the decisions made through consensus or majority vote. The Ministerial Committee is based in Geneva, Switzerland, and it conducts meetings for important decisions.

Councils in the WTO

  • General Council
  • Goods Council
  • Service Council
  • Intellectual Property Rights Council

General Council is the primary council in the WTO and all the other councils report to this council only. There are different committees and working groups working within the WTO.

Important objectives of WTO

  • WTO works to promote World Trade in a fruitful manner for every member country.
  • WTO ensures a fair and free global multilateral trading system.
  • WTO tries to offer a competitive edge to the developing countries by offering advantages in international trades.
  • WTO tries to utilize the resources of this world in an efficient manner.
  • WTO helps its members in their development and improves their productivity.
  • WTO resolves any disputes between trading nations in an unprejudiced manner.

WTO has to face several challenges, especially from anti-WTO organizations. Many protesters believe that the WTO negotiations are biased and it favours the powerful or developed economies. Some opponents have claimed that WTO compromises the national sovereignty of countries because of its right to review the domestic trade policies of any member nation. There have been cases where some countries had to give up their benefits to comply with the WTO agreements. Some of the major issues are observed in TRIPS (intellectual property rights) agreements.

A free multilateral trading system can boost investments in every country, hence allowing them to develop economically. Most of these investments are made by developed countries into the developing ones, so they often receive some advantages. However, these policies do not tend to engulf the rights of developing nations. There will always be a controversy over the best approach towards creating a global economic system and WTO would succeed eventually.

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