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World Trade Organisation

Civics | 7-14 yrs | Interactive

What is the World Trade Organisation?

The World Trade Organisation is an inter – governmental organisation that regulates international trade. It has been created to ensure that trade occurs smoothly, predictably and as freely as possible. WTO agreements have been negotiated and signed by a substantial number of the world’s trading nations and has been ratified in their parliaments.

How was the WTO conceived and why?

The World Trade Organisation was conceived and created to handle trade negotiations.

Initially conceived as ITO, but functioning as GATT, it continued to be one of the key pillars of Post World War 2 economic reconstruction and development. This is before WTO came into being.

GATT proved to be highly successfully in liberalising world trade. By the mid 1980s, there was a need for a stronger multilateral organisation to monitor trade and resolve trade disputes. Following the Uruguay Round, (1986 – 1994) of multi trade negotiations, World Trade Organisation began its operation.

Why did GATT change to WTO?

WTO is a successor to the General Agreement on Tariffs and Trade, GATT created in 1947. GATT had been created in the hope that a specialised United Nations agency called International Trade Organisation (ITO) would materialise. GATT was successful for five decades, despite non – materialisation of ITO.

WTO began operations on January 1, 1995, under the Marrakesh Agreement signed by 123 countries. By 2010, World Trade Organisation had more than 160 members.

What are the objectives of WTO?

World Trade Organisation has six set objectives. They are,

  1. To set and enforce rules for international trade
  2. To provide a forum for negotiating and monitoring further trade liberalisation
  3. To resolve trade disputes
  4. To increase the transparency of decision-making processes
  5. To cooperate with other major international economic institutions involved in global economic management
  6. To help developing countries benefit fully from the global trading system

WTO focuses on all goods, services and intellectual and some investment policies, as well.

Organisational structure of WTO

The General Council has the following subsidiary bodies that oversee several committees and agencies. They are :

  1. Council for Trade in Goods : There are 11 committees under this Council’s jurisdiction
  2. Council for Trade : Related Aspects of Intellectual Property Rights : These work in recording the intellectual property information within WTO and other international organisations.
  3. Council for Trade in Services : The Council operates under the guidance of the General Council and is responsible for overseeing the functioning of the General Agreement on Trade in Services (GATS). It is open to all WTO members and can create subsidiary bodies as required.
  4. Trade Negotiations Committee : Deals with current trade talks.

What purpose does World Trade Organisation serve?

  • WTO attempts to protect small and weak countries against discriminatory trade practices of large and powerful countries.
  • Secondly, it also requires members to limit trade only through tariffs and to provide market access not less favourable than that specified in their schedules.
  • It also enables to help governments resist lobbying efforts by groups claiming special favours on trade.

What is WTO’s role in resolution of trade disputes?

  • Just like GATT before it, WTO plays a very strong role in helping settle trade disputes. Members are commited not to take unilateral or one sided decisions, against other members. Instead they are expected to seek to settle issues with the dispute settlement system and to abide by its rules and findings.
  • Resolution of Trade Disputes begin with bilateral consultations, through the mediation, or good offices. If this does not work, an independent panel is created to hear the dispute.
  • All settlements have to finish within nine months and are settled as per the rules set by the Appellate Body, unless a consensus exists among the members against doing so.