WTO AND FREE TRADE

World Trade Organization (WTO)

The World Trade Organization, (WTO), is the primary international body to help promote free trade, by drawing up the rules of international trade. However, it has been mired in controversy and seen to be hijacked by rich country interests, thus worsening the lot of the poor and inviting protest and intense criticism.

The organization is currently endeavoring to persist with a trade negotiation called the Doha Development Agenda (or Doha Round), which was launched in 2001 to enhance equitable participation of poorer countries which represent a majority of the world's population. The WTO has 153 members, representing more than 97% of the world's population, and 30 observers, most seeking membership.

The WTO's headquarters is at the Centre William Rappard, Geneva, Switzerland.

DISCUSSION ON WTO FUNCTIONS

The WTO agreements cover goods, services and intellectual property. They spell out the principles of liberalization, and the permitted exceptions. They include individual countries’ commitments to lower customs tariffs and other trade barriers, and to open and keep open services markets. They set procedures for settling disputes. These agreements are not static; they are renegotiated from time to time and new agreements can be added to the package. Many are now being negotiated under the Doha Development Agenda, launched by WTO trade ministers in Doha, Qatar, in November 2001.

WTO agreements require governments to make their trade policies transparent by notifying the WTO about laws in force and measures adopted. Various WTO councils and committees seek to ensure that these requirements are being followed and that WTO agreements are being properly implemented. All WTO members must undergo periodic scrutiny of their trade policies and practices, each review containing reports by the country concerned and the WTO Secretariat.

The WTO’s procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for enforcing the rules and therefore for ensuring that trade flows smoothly. Countries bring disputes to the WTO if they think their rights under the agreements are being infringed. Judgments by specially appointed independent experts are based on interpretations of the agreements and individual countries’ commitments.

WTO agreements contain special provision for developing countries, including longer time periods to implement agreements and commitments, measures to increase their trading opportunities, and support to help them build their trade capacity, to handle disputes and to implement technical standards. The WTO organizes hundreds of technical cooperation missions to developing countries annually. It also holds numerous courses each year in Geneva for government officials. Aid for Trade aims to help developing countries develop the skills and infrastructure needed to expand their trade.

ARGUMENTS AGAINST FREE TRADE UNDER WTO:

If developing countries have industries that are relatively new, then at the moment these industries would struggle against international competition. However if they invested in the industry then in the future they may be able to gain Comparative Advantage.

If industries are declining and inefficient they may require large investment to make them efficient again. Protection for these industries would act as an incentive to for firms to invest and reinvent themselves. However protectionism could also be an excuse for protecting inefficient firms.

Import taxes can be used to raise money for the govt however this will
only be a small amount of money.

It is argued that free trade can harm the environment because LDC may use up natural reserves of raw materials to export. Also countries with strict pollution controls may find consumers import the goods from other countries where legislation is lax and pollution allowed.

Reducing imports can help the current account. However in the long term this is likely to lead to retaliation.

Criticisms of Current Forms of Free Trade

“The emergence of capitalism represents a culture that is in many ways the most successful that has ever been deployed in terms of accommodating large numbers of individuals in relative and absolute comfort and luxury. It has not been as successful, however, in integrating all in equal measure, and its failure here remains on of its major problems. It has solved the problems of feeding large numbers of people (although certainly not all), and it has provided unprecedented advances in health and medicine (but, again, not for all). It has promoted the development of amazingly complex technological instruments and fostered a level of global communication without precedent. It has united people in common pursuits as has no other culture. Yet it remains to be seen when the balance sheet is tallied whether capitalism represents the epitome of “progress” that some claim.

— Richard H. Robbins, Global Problems and the Culture of Capitalism, (Allyn and Bacon, 1999), pp. 11–12”

Discussion:

· Capitalism has been successful in nurturing technological innovation, in promoting initiative, and in creating wealth (and increasing poverty). The monopoly capitalism of the colonial era for example was very destructive.

· This criticism comes from many areas including many, many NGOs, developing nation governments and ordinary citizens.

As per my study over WTO practices, I want to highlight these points regarding free trade:

• Almost 300 preferential trade agreements (notified and not notified) were in force in 2010. On average, a WTO member is party to 13 PTAs.

• Despite the surge of PTAs in recent years, only 16% of global merchandise trade receives preferential treatment. In addition, less than 2% of world trade is eligible for preference margins above 10 percentage points.

• Non-preferential (MFN) tariffs are low, equal to 4% on average in 2009. Most “sensitive” sectors remain “sensitive” in PTAs: approximately 66% of tariff lines (products defined by their customs codes) with MFN rates above 15% have not been reduced in PTAs.

• If the preferential access enjoyed by other exporters is taken into account, less than 13% of preferential trade benefits from a competitive advantage exceeding 2 percentage points.

· Signing deep integration PTAs increases trade in production networks by almost 8% on average. In addition, a high level of trade in production networks raises the likelihood of signing deep agreements.

· A large number of disputes between PTA members are brought to the WTO dispute settlement system. On average, about 30% of WTO disputes are between members who are parties to the same PTA.

CONCLUSION OF THE STUDY

Free trade fosters investment into other countries, which can help boost the economy and eventually the standard of living of all countries involved. As most investment comes from the developed and economically powerful into the developing and less influential economies, there is, however, a tendency for the system to give the investor an advantage. Regulations that facilitate the investment process are in the investor's interest because these regulations help foreign investors maintain an edge over local competition. Controversy over what is the best course of action in the creation of a global economic system - one that fosters free trade and free choice - will persist.

REFRENCES OF THE ST STUDY

· http://en.wikipedia.org/wiki/World_Trade_Organization#History

· http://www.wto.org/

· http://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm