WTO is Born

• Overview
• Structure
• WTO Agreements
• Criticism, the WTO arguments, and their flaws
• Developing Countries

 

---

Overview

Source: WTO Web Site

The World Trade Organisation (WTO) was formed in 1995 and is relatively young compared to other trade organisations. WTO replaced the former GATT (General Agreements on Tariffs and Trade), which began with the Second World War.
 
Since the 1950's world trade has increased 14 times compared to pre-1997. Annually product trade grows on average of 6%. The GATT and the WTO built this strong trading system and now covers over 100 trade and services.

To Top

 

---

Structure
The world trade organisation consists of 150 members with a further 30 countries negotiating membership. These members control approximately 97% of world trade. The demand for membership suggests that nations believe that improved international trade is critical for their economic development.

To Top

 

---

WTO Agreements
Some benefits claimed by the WTO are:

• Peace; Trading nations are more likely to seek negotiated conflict resolution;
• Dispute Resolution; Independent Committees hear disputes;
• Rules for trade negotiation, including tariff reductions and anti-dumping measures, competition policy and government transparency;
• The 'cost of living' increases with protectionist tariffs, so free trade reduces real costs for consumers;
• Greater product variety available to consumers including those, which are seasonally restricted;
• Incomes growth as the population shifts to production for a wider market, and embraces increased efficiencies;
• Employment Growth generated as the costs of production decline and the possible returns increase the need for labour should increase;
• The WTO ensures that governments are less likely to respond to special interest lobby groups. This should mean sectional forces less influence decisions;
• Efficiency ; Discouraging protectionist policies allows increased efficiency in production. It also discourages disincentives such as subsidies for local producers;
• Good Government; The WTO promotes transparency in government decisions.

Currently 60 agreements ensure that each county is guaranteed that its exports will be treated correctly in other countries markets, and that the same is done in return. This also gives the developing countries some control in their development.

To Top

 

---

Criticism, the WTO arguments, and their flaws

1. Criticism- That the WTO imposes its decisions on member nations.
   WTO response-All decisions are reached by negotiation and membership is optional.
   Flaw-The outlook for nations excluded from global trade are appalling, as demonstrated by the economies of North Korea and Cuba, so membership is both desirable and agreements, at any cost, are better than exclusion.
2. Criticism- The WTO seeks free trade at any cost.
   WTO response-This is not true as there are some environmental restrictions, and all decisions are made by agreement between concerned countries.
   Flaw- As previously asserted any trade agreement is preferable to exclusion, so the parties are not arguing from an equal power position. The under-developed nation is dependent on trade and investment: limited resources are developed largely to the benefit of the dominant economy, but with some improvement for the local economy, notably those involved in the international sectors .
3. Criticism-The WTO is for trade rather than development.
   WTO response- It believes that trade and development promote each other. However it acknowledges that underdeveloped nations gain too little from their trade.
   Flaw-It fails to address the widening gap of inequality between the developed and under-developed economies. The Director General of the WTO, Supachai Panitchpakdi, recently commented that 'Despite a six-fold growth in trade there is a worrying lack of benefits extending around the world.'
4. Criticism-The WTO is anti -green.
   WTO response- It believes that separate environmental legislation should protect these issues, but has introduced some limited provisions to protect resources. It acknowledged the need for sustainable development.
   Flaw-It fails to explain how this can be achieved with limited resources and expanded consumerism. It has been calculated that for the entire world's population to enjoy an equivalent of the current USA lifestyle, would require a planet 4 times the earth's size. It is fallacious to suggest that such consumption is either feasible or desirable. Economic growth cannot continue infinitely, because of these inherent limitations. Although technology may overcome some constraints, it is unwise to assume that it will overt all potential catastrophes, such as the current predictions regarding global climate change due to greenhouse emissions, including rising sea-levels, increased mean temperatures, and altered rainfall patterns. Additionally, the WTO's limited provisions were only introduced during the 1990's after substantial evidence of internationally sourced environmental degradation and irresponsibility.
5. Criticism-that the WTO is 'anti-health'
   WTO response-As governments sign all agreements; the WTO believes it is their responsibility to ensure the health and safety of workers.
   Flaw-It does not consider that these governments compete for investment capital with other areas. Reduced safety and worker conditions are often compromised to secure foreign investment. There are examples of companies deliberately siting high-risk industries where there is least legislative protection , including the Union Carbide Bhopal disaster.
6. Criticism-That the WTO wrecks jobs
   WTO response-This is seen as a simplistic reaction to the adjustment period in industrial change, where some industries become uncompetitive and new industries emerge.
   Flaw-This fails to recognise that such rapid and widespread change can lead to enormous social upheaval, and rarely are the previous workforce rapidly transferred to these new industries. While the global and national figures are positive, the impacts at the local and regional level may be catastrophic. Older workers are more severely disadvantaged by this process, and are likely to be permanently unemployed or under-employed. Rural areas decline as populations shift to the most profitable market sectors.
   It also fails to address resource exhaustion, which arises when all the natural resources suitable for export have been sold. Nauru, a small resource-poor Pacific island nation, was heavily mined for its phosphates, but these reserves are gone now. Trade is restricted to a few services (such as refugee detention, as part of Australia's 'Pacific solution') .
7. Criticism-Small countries are powerless in the WTO.
   WTO response-In fact the WTO has increased the bargaining capacity of smaller nations. As more 3rd world nations join the WTO, they are in a better position to argue for increased benefits and participation in global trade.
   Flaw-They are concurrently exposed to increased competition to sell their commodities, and must negotiate with the dominant economies for special consideration for their circumstances.
8. Criticism- The WTO is swayed by vested interest groups
   WTO response-As governments make decisions, it is only through these groups that special groups can sway decisions, so it is more impartial.
   Flaw- Although this may appear to be true, often business interests are strongly protected by governments. There are often linkages between position and business, at a variety of levels. Further these linkages can found in any number of nations, where that industry is profitable. The tobacco industry has successfully lobbied via aligned governments for support of its interests.

To Top

 

---

Developing Countries

POLL

Do you think the WTO fulfills its objectives or do you think that it is considerably flawed? It is highly successful It should be examined and changed significantly Show Results

The WTO is occupied by over three quarters of 3rd world countries and developing countries. All agreements have special provisions these countries. These include longer time periods to implement agreements and commitments, measures to increase their trading opportunities, provisions requiring all WTO members to safeguard their trade interests, and support to help them build the infrastructure for WTO work, handle disputes, and implement technical standards.
 
In 1997 and 2001 conferences discussed market access, measures to increase trade, technical initiatives and assistance for least-developed countries, and designing an integrated trading framework. Developing countries' special needs are considered to improve their involvement in the global trading system.

To Top