The Institution of the World Trade Organization

The World Trade Organization (WTO) is an internationally formulated body that aims to encourage free trade through various stipulations. The institution of the WTO is subject to a simmering debate that revolves around the effectiveness of this organization. The WTO came into being in 1995 after lengthy negotiations that culminated in the “Uruguay Round of Talks”. WTO in its current form replaced another body that was known as the General Agreement on Tariffs and Trade (GATT) of 1948.

Like GATT, WTO’s main objective was to bring down various barriers to international trade1. Various stakeholders are of the view that some ‘rich’ countries have been using the WTO to further their often-capitalist agendas. On the other hand, WTO has not been ultimately successful in its goal to create a free-trade environment across the world. This essay addresses the creation of the WTO, the organization’s goals, its successes, and its current challenges.

Some observers think that the interests of the poor and developing countries have not been adequately represented by the policies of the WTO. The organization is involved in various aspects of modern trade including agriculture, goods, services, and intellectual properties. This essay tracks the relevance of the trade organization concerning its goal of creating free global trade and about the international political economy. Since its creation, WTO has made several strides towards the achievement of its initial goals. However, the trade organization has also faced various challenges in the course of its history.

Several factors feature in both the creation and purpose of the WTO. First, it is important to note that unlike many other trade organizations, the WTO is relatively young after having been in operation for about two decades. This is although some of the leading global economies are structurally a few centuries old. For example, the Laissez-Faire Economy was first proposed in the 1700s2. This economic model vouches for aspects of equality that were later the subject of the GATT and the WTO.

The purpose of the WTO can be classified into three categories. The first main purpose of creating the body was to have it act as a platform through which international trade negotiations could happen. The other main purpose of the WTO was to have an organization that could administer international trade advancements through various activities such as “implementation of commitments, provision of training, technical assistance, and dissemination of information based on research activities”3.

The other prominent function of WTO is that the organization acts as an international-trade dispute resolution system. A competitive international trading environment has prompted some major global trade players to seek ‘shortcuts’. Countries such as America and England have sought to maintain their economic supremacy by all means necessary. For example, the First World War decimated American resources by a significant margin and President Roosevelt found it fit to print more money to offset this deficit4.

In the current global economic environment, organizations such as the WTO would be vigilant on the effects that self-inflicted inflation would have on the international securities market. During the time of its creation, the most prominent function of the trade organization was to provide nations with a platform for international trade negotiations. However, over the last decade, the organization has been instrumental in instituting other functions that are closely related to the institution of the current international political economy.

For example, currently, the WTO disseminates various aspects of annually updated statistics. Furthermore, most countries and trading blocs have been using the trade organization as a tool for dispute resolution. Nevertheless, the WTO has been struggling to strike a balance between being a rulemaking and a rule-enforcing institution.

The WTO was founded on some basic principles just like other internationally formulated bodies. The most prominent principle in the formulation of the WTO is that of non-discrimination5. As early as the 1950s, there were indications that some developed countries were exerting ‘unfair’ trade practices at the expense of poor and developing nations. Nevertheless, it is also important to note that the late arrival of the WTO coincides with the achievement of political freedom in various places across the world. In one of the class lectures it is noted that without political freedom, most countries have found it hard to achieve economic freedom6. Under the WTO, countries are expected to treat all traders in the same manner whether they are locally or nationally affiliated. Consequently, it is wrong to favor domestic traders at the expense of the ones from foreign companies. Other companies display their discriminatory trade practices by favoring some of their trade partners over others.

Losses by sector in agriculture

CHART 1 Is a representation of how WTO policies and rules may lead to losses of some particular trade items7. Regional dominance and/or rivalry is another reason why the WTO intervenes in global trade disputes. For instance, “Singapore, a former British Colony, is facing stiff regional trade competition from other developing countries in the region such as south Korea and Malaysia”8.

The WTO has explicitly expressed its policy of treating all trading nations equally. This non-discriminatory policy comes at the heels of pre-existing trading concessions between nations. It is important to note that some of these concessions go against the non-discriminatory policy of the WTO. Another important principle that pertains to the WTO is that of reciprocity. Under this principle, countries are expected to provide similar trade concessions amongst themselves.

Transparency is also another basic principle of the trade organization. Transparency provides that all negotiations about international trade agreements should be conducted fairly and openly. The non-discriminatory policy is subject to some level of debate because there are people who feel that “developing countries may require ‘positive discrimination’ to create a balance in regards to their history of unequal trade practices”9.

The perception of accomplishment in regards to the effectiveness of the WTO goal of promoting balanced global trade varies. Nevertheless, the general agreement concerning the institution of the WTO has been that the organization has fallen short of expectations when it comes to its overall performance. One school of thought argues that WTO has only been in existence for a short period and its effectiveness cannot be judged adequately. Other stakeholders believe that with a few improvements, the WTO can effectively carry out its mission of promoting global trade. One area where the WTO has had considerable success is in creating assurance among nations and global citizens10.

Consequently, the WTO has been successful in becoming a symbol of ‘global economic governance’. The formation of the WTO was a concerted effort that involved both the major and minor players in the global trade. Therefore, even though the organization does not satisfy the expectations of all its stakeholders, its vast representation creates confidence within other global platforms.

A significant portion of world trade stakeholders agrees that the WTO has had significant success in its bid to curb rogue trading, free-riding traders, lack of transparency, and ignorance against compliance. In addition, these mainstream stakeholders are of the view that since its inception, the trade organization has been instrumental in promoting compliance within global trading platforms. Another main importance of the trade organization is that it has created awareness concerning instances of misuse of power among trading nations. Although the WTO has not addressed the issue of trade balance among countries, it has highlighted the conflicts that apply to this ultimate goal.

Most members have realized that their interests do not always coincide with those of others within the organization. For example, some stakeholders have noted that some of the major international trade players tend ‘to only speak for themselves’11. Countries such as America have supersized economies that are the size of several dozen African economies. Consequently, America believes it has the right-of-way when it comes to international trade policies owing to its economic power. The WTO’s task of resolving conflicts goes together with the avoidance of conflicting trade policies. This task has been difficult to achieve although indications are that the organization is on the right track.

Currently, various challenges are faced by the WTO in its efforts to promote free global trade. The first hindrance to the organization’s progress is the power politics that dominate the global trade. Even though most of the nations that operate under the WTO conform to the principles of the organization on paper, in reality, they expect to collect indirect favors. Overall, the international body operates under a different reality than the one under which its principles are based on. First, the WTO cannot adequately adhere to its principle of transparency because it also seeks to influence global trade agendas indirectly. For instance, the WTO is very accommodative of mega corporations whilst ignoring the smaller players12.

Another harsh reality for the WTO is that the organization has to confront inequality through national laws that concern environmental, health, and safety issues. Some of these national stipulations could be maliciously formulated to shut out specific global traders. For instance, a few years ago the United States tried to effect a trade-ban on shrimp that had been caught using equipment that was unfriendly to the environment.

However, the WTO ruled that this ban was against the spirit of free trade. The truth is that global trade is subject to various realities that the formulation of the WTO had not taken into account. Another area where the WTO has been experiencing challenges involves intellectual property rights. The issue of intellectual property has dominated the global economy of the new millennium. However, this issue was not prominent in 1995 when the WTO was formulated13.

This essay has explored the institution of the WTO including areas where the organization has made a positive impact as well as the setbacks that have slowed its progress. The interaction between the global traders and the organization has lacked the symbiosis that was originally intended to drive the agenda of free trade. On the other hand, the realities that apply to global trade have proved to be too complex to be solved by the principles of the WTO.

Reference List

Correa, Carlos. Intellectual Property Rights, the WTO and Developing Countries: the TRIPS Agreement and Policy Options. Boston: Zed books, 2000.

Oatley, Thomas. International Political Economy. New York: Routledge, 2015.

Seay, W. “The origins of political Economy.” Lecture at Virginia Commonwealth University, 2016.

Subramanian, Arvind and Shang-Jin Wei. “The WTO Promotes Trade, Strongly but Unevenly.” Journal of International Economics 72, no. 1 (2007): 151-175.

WTO. “World Trade Report.” World Trade Organization. 2015. Web..

Footnotes

  1. Arvind Subramanian and Shang-Jin Wei, “The WTO Promotes Trade, Strongly but Unevenly,” Journal of International Economics 72, no. 1 (2007): 151.
  2. W Seay, “The origins of political Economy,” (Lecture at Virginia Commonwealth University, 2016).
  3. Thomas Oatley, International Political Economy (New York: Routledge, 2015), 34.
  4. W Seay, “The origins of political Economy.”
  5. Thomas Oatley, International Political Economy (New York: Routledge, 2015), 64.
  6. W Seay, “The origins of political Economy,” (Lecture at Virginia Commonwealth University, 2016).
  7. WTO, “World Trade Report,” World Trade Organization. 2015. Web.
  8. W Seay, “The origins of political Economy,” (Lecture at Virginia Commonwealth University, 2016).
  9. Carlos Correa, Intellectual Property Rights, the WTO, and Developing Countries: the TRIPS Agreement and Policy Options (Boston: Zed books, 2000), 59.
  10. Arvind Subramanian and Shang-Jin Wei, “The WTO Promotes Trade, Strongly but Unevenly,” Journal of International Economics 72, no. 1 (2007): 155.
  11. W Seay, “The origins of political Economy,” (Lecture at Virginia Commonwealth University, 2016).
  12. Carlos Correa, Intellectual Property Rights, the WTO, and Developing Countries: the TRIPS Agreement and Policy Options (Boston: Zed books, 2000), 92.
  13. Arvind Subramanian and Shang-Jin Wei, “The WTO Promotes Trade, Strongly but Unevenly,” Journal of International Economics 72, no. 1 (2007): 157.