Thursday, September 30, 2021

The role of World Trade organisation

The role of World Trade organisation 

The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade between nations. Governments use the organization to establish, revise, and enforce the rules that govern international trade. It officially commenced operations on 1 January 1995, pursuant to the 1994 Marrakesh Agreement, thus replacing the General Agreement on Tariffs and Trade (GATT) that had been established in 1948. 

The WTO is the world's largest international economic organization, with 164 member states representing over 96% of global trade and global GDP. The WTO facilitates trade in goods, services and intellectual property among participating countries by providing a framework for negotiating trade agreements, which usually aim to reduce or eliminate tariffs, quotas, and other restrictions; these agreements are signed by representatives of member governments and ratified by their legislatures. The WTO also administers independent dispute resolution for enforcing participants' adherence to trade agreements and resolving trade-related disputes. 

The organization prohibits discrimination between trading partners, but provides exceptions for environmental protection, national security, and other important goals. The WTO is headquartered in Geneva, Switzerland. Its top decision making body is the Ministerial Conference, which is composed of all member states and usually convenes biannually; consensus is emphasized in all decisions. Day-to-day functions are handled by the General Council, made up of representatives from all members. A Secretariat of over 600 personnel, led by the Director-General and four deputies, provides administrative, professional, and technical services. The WTO's annual budget is roughly 220 million USD, which is contributed by members based on their proportion of international trade.

Global trade rules

Global rules of trade provide assurance and stability. Consumers and producers know they can enjoy secure supplies and greater choice of the finished products, components, raw materials and services they use. Producers and exporters know foreign markets will remain open to them.

This leads to a more prosperous, peaceful and accountable economic world. Decisions in the WTO are typically taken by consensus among all members and they are ratified by members’ parliaments. Trade frictions are channelled into the WTO’s dispute settlement process, where the focus is on interpreting agreements and commitments and how to ensure that members’ trade policies conform with them. That way, the risk of disputes spilling over into political or military conflict is reduced.

By lowering trade barriers through negotiations among member governments, the WTO’s system also breaks down other barriers between peoples and trading economies.

The role of World Trade organisation

At the heart of the system – known as the multilateral trading system – are the WTO’s agreements, negotiated and signed by a large majority of the world’s trading economies, and ratified in their parliaments.

These agreements are the legal foundations for global trade. Essentially, they are contracts, guaranteeing WTO members important trade rights. They also bind governments to keep their trade policies transparent and predictable which is to everybody’s benefit.

The agreements provide a stable and transparent framework to help producers of goods and services, exporters and importers conduct their business.

Trade negotiations

The World Trade Organization came into being in 1995. One of the youngest of the international organizations, the WTO is the successor to the General Agreement on Tariffs and Trade (GATT) established in the wake of the Second World War.

So while the WTO is relatively young, the multilateral trading system that was originally set up under the GATT is over 70 years old.

The past 70 years have seen an exceptional growth in world trade. Merchandise exports have grown on average by 6% annually. This growth in trade has been a powerful engine for overall economic expansion and on average trade has grown by 1.5 times more than the global economy each year. Total exports in 2019 were 250 times the level of 1948. The GATT and the WTO have helped to create a strong and prosperous trading system contributing to unprecedented growth.

The system was developed through a series of trade negotiations, or rounds, held under the GATT. The first rounds dealt mainly with tariff reductions but later negotiations included other areas such as anti-dumping and non-tariff measures. The 1986-94 round – the Uruguay Round – led to the WTO’s creation.

The negotiations did not end there. In 1997, an agreement was reached on telecommunications services, with 69 governments agreeing to wide-ranging liberalization measures that went beyond those agreed in the Uruguay Round.

In the same year, 40 governments successfully concluded negotiations for tariff-free trade in information technology products, and 70 members concluded a financial services deal covering more than 95% of trade in banking, insurance, securities and financial information.

In 2000, new talks started on agriculture and services. These were incorporated into a broader work programme, the Doha Development Agenda, launched at the fourth WTO Ministerial Conference in Doha, Qatar, in November 2001.

The new work programme included negotiations and other work on non- agricultural tariffs, trade and the environment, WTO rules on anti-dumping and subsidies, trade facilitation, transparency in government procurement, intellectual property and a range of issues raised by developing economies as difficulties they face in implementing WTO agreements.

Negotiations on these and other topics have resulted in major updates to the WTO rulebook in recent years. A revised Government Procurement Agreement – adopted at the WTO’s 8th Ministerial Conference in 2011 – expanded the coverage of the original agreement by an estimated US$ 100 billion a year.

At the 9th Ministerial Conference in Bali in 2013, WTO members struck the Agreement on Trade Facilitation, which aims to reduce border delays by slashing red tape.

When fully implemented, this Agreement – the first multilateral accord reached at the WTO – will cut trade costs by more than 14% and will lift global exports by as much as US$ 1 trillion per year.

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