What is the World Trade Organization (WTO)?

The World Trade Organization (WTO) is a global organization that deals with the rules of trade between countries. It consists of 164 member countries and its aim is to ensure that trade flows as smoothly and predictably as possible.

If a trade dispute arises, the WTO works to resolve it. For example, if a country imposes a trade barrier in the form of tariffs against a particular country or a particular good, the WTO can impose trade sanctions against the violating country. The WTO will also try to resolve the dispute through negotiations.

As an international body that negotiates and regulates global trade issues between sovereign nations, the WTO has both supporters and detractors. Its critics often raise concerns about the unintended effects of transparency, sovereignty, and free trade on local economies and regimes.

Understanding the World Trade Organization (WTO)

The purpose of the WTO is to Global trade begins smoothlyfreely and predictably. The WTO establishes and embodies the basic rules of global trade between member countries; international trade. The WTO aims to create economic peace and stability in the world through a multilateral system based on the consent of member states.

WTO has 164 members who have also ratified WTO rules in their own countries. This means that WTO rules become part of a country’s domestic legal system. Therefore, the rules apply to local companies doing business internationally.

If a company decides to invest in a foreign country, for example by opening an office in that country, WTO rules (and therefore a country’s domestic laws) will determine how this can be done. Theoretically, if a country is a member of the WTO, its domestic laws cannot conflict with WTO rules and regulations, which govern approximately 98% of all world trade by 2024.

The director-general of the World Trade Organization since March 2021 is Nigerian Ngozi Okonjo-Iweala. Decisions are made unanimously, but a majority vote can also decide (this is very rare). The Ministerial Conference, located in Geneva, Switzerland, meets at least every two years to make the most important decisions.

As well as many working groups and committees, there is also a goods council, services council and intellectual property rights council, all of which report to a general council.

World Trade Organization History

World Trade Organization (WTO) was born General Agreement on Tariffs and Trade (GATT) was established in 1947. GATT was part of the Bretton Woods-inspired family that included the International Monetary Fund (IMF) and the World Bank. A series of trade negotiations around GATT began at the end of World War II and aimed to reduce tariffs to facilitate global trade.

GATT’s logic was based on: most favored nation (MFN) clauseThis gives a country exclusive trading rights to the selected country when it is assigned by another country. GATT aimed to help all countries achieve MFN-like status so that no country would have a trade advantage over others.

The WTO replaced GATT as the world’s global trade body in 1995, and its current governing rules stem from the Uruguay Round GATT negotiations, which took place from 1986 to 1994. The GATT trade regulations established between 1947 and 1994 (and particularly those negotiated during the Uruguay Round) remain the basic rulebook for multilateral trade in goods. Specific sectors such as agriculture are covered, as well as issues related to them. anti-dumping.

Trade Measures Imposed by Countries

The Uruguay Round also laid the foundations for the regulation of trade in services. The General Agreement on Trade in Services (GATS) is the guide that guides multilateral trade in services. intellectual property Ideas, concepts, designs, patents, etc. Rights were addressed in establishing regulations that protect trade and investment.

WTO Trade Settlement Trends

Debates Around the WTO

Former President Donald Trump threatened to withdraw from the WTO in August 2018, calling it a “disaster” as part of broader US attempts to renegotiate global trade agreements. If the United States had taken action to withdraw from the organization, trillions of dollars of global trade would have been disrupted. During the Biden Administration, the United States has committed to joining the WTO but has emphasized that reforms are still needed.

The controversy during the Trump Administration was not the first time the WTO came under scrutiny. In 1999, protests at the gates of the World Trade Organization’s third Ministerial Conference, held in Seattle, Washington in 1999, were later dubbed the “Battle of Seattle”. Similar demonstrations against the WTO occurred in Canada and Switzerland in the 2000s and 2010s.

Anti-WTO protests are a response to the consequences of establishing a multilateral trading system. Critics say the outcomes of WTO policies are undemocratic due to a lack of transparency during negotiations.

Opponents also argue that national sovereignty is compromised because the WTO acts as a global authority on trade and has the right to review a country’s domestic trade policies. For example, regulations that a country may wish to establish to protect its industry, workers, or environment may interfere with the WTO’s purpose of facilitating free trade.

A country may have to sacrifice its interests to avoid violating WTO agreements. Thus, a country’s options become limited. Moreover, brutal regimes that harm their own countries may unwittingly receive covert support from foreign governments that continue to do business with these regimes in the name of free trade. Therefore, negative governments that favor big business remain in power at the expense of a representative government.

A high-profile WTO dispute concerns intellectual property rights and a government’s duties to its citizens vis-à-vis a global authority. A well-known example is HIV/AIDS treatments and their costs. patented medicines. Poor countries such as South America and sub-Saharan Africa cannot afford to buy these patented drugs. If they purchased or produced the same drugs under an affordable generic label, this would save thousands of lives; As WTO members, these countries will be violating intellectual property rights agreements and will be subject to possible trade sanctions.

In conclusion

Free trade encourages investment in other countries, which can help increase the economy and ultimately the living standards of all countries involved. Since most investments flow from developed and economically strong countries to developing and less influential economies, the system has a tendency to provide an advantage to the investor.

Regulations that facilitate the investment process are in the interest of investors because these regulations help foreign investors gain an advantage in local competition. While many countries, including the USA, strengthen their protectionist stance in trade, the future of the world The World Trade Organization remains complex and uncertain.