World Trade Organisation (WTO)
International business involved complex
issues among various countries way
back in 1950’s. A keen need then was felt to establish separate mechanism for
regulating and controlling trade relation across the countries around the
world. As a result, the General Agreement on Tariffs and Trade. (GATT) was
signed at Geneva on 30th October 1947 by
23 countries. It came into effect on 1st January 1948. GATT
was a multilateral treaty. It laid down rules and regulations for conducting
international trade. GATT achieved many success but various countries felt the
need to create a new international
body to replace the GATT. The GATT which
remained in force from 1948 to 1994 thus came to an end with the establishment
of World Trade Organisation (WTO) on 1st January 1995.
The World Trade Organisation (WTO) was
estabilished on 1st January 1995. The GATT was renamed as WTO with some
changes. WTO has 164 member countries as on 29th July 2016 . India is one of
the three founder members. The ministerial conference consisting of the representatives
of all the member countries is the highest decision- making authority of WTO.
It meets almost once in every three years. It is empowered to take decisions on
all vital matters under the multilateral trade agreements. The day- today work
of WTO has been entrusted to the General Council. WTO is located at Geneva
Objectives of WTO
The objectives of WTO include the
Improving the standard of living of
people in member countries
Making optimum utilization of world’s
resources for sustainable development of member countries.
Promoting an integrated more viable and
durable trading system in the sphere of international business
Expansion of trade in goods and services
Ensuring full employment and large
steady growth volume of real income and effective demand
Protecting the environment
WTO performs the following functions
It is a forum for negotiation and
formalization of trade agreement among the member countries.
It settles disputes and grievances
relating to trade among the member countries.
It frames commonly acceptable
code of conduct in order to reduce trade barriers.
It holds consultations with IMF and
World Bank(IBRD) and its affiliates to bring about a greater understanding and
co-operation in global economic policy making.
It supervises the operations of
agreement relating to General Agreement on Tariffs and Trade(GATT) and
Trade-Related Intellectual Properties Rights (TRIPS)
It regulates trade between participating
Some of the major benefits of WTO are as
WTO is promoting international peace and
creating a conducive environment for conducting international trade
It settles the trade disputes amicably
among the member countries.
It promotes the standard of living of
people by increasing their income level from free trades
WTO has removed quantitative
restrictions and non-tariff barriers. It
has facilitated free flow of foreign trade among the member countries.
The countries can impose import restrictions only to correct balance of
payments difficulties and not otherwise.
It stimulates economic growth of
developing countries by providing them with much needed capital and giving them
preferential treatment in trade related matters.
WTO organizes periodical regional and
international conference. Thus developing countries get opportunity to learn
the technicalities, rules and regulations governing world trade, technical
assistance available globally, trade
potentials in member countries and so on.
WTO gives people across the world a
wider choice of goods and broader range of qualities of goods to choose from by
promoting free trade among the member countries.
WTO has lowered trade barriers and
thereby allowed trade to flourish across the world. The increase in
trade contributes to increase in national income and personal income of people
WTO provides a platform for member
countries to establish trade links with one another. In the absence of WTO
member countries may have to enter many multilateral agreement with so many countries
across the world. It provides a greater access to all nations under one roof.
10. WTO is committed to protecting free trade. It has framed rules on subsidies and dumping.
The following criticisms are levelled
Developing countries need some sort of
trade protection to develop their new industries. Many developed countries had
once used this protection to nurture their infant industries in their
development stage. In this context prevention of developing countries from
defending their infant industries altogether through restriction is unfair. It
is suspected to be a conspiracy to indirectly favour MNC’s.
This is the core of WTO rules. Under
this rule member countries are advised not to discriminate among the home
enterprises, multi-nationals and foreign
enterprises. In other words WTO prevents developing countries from favouring
their emerging companies. This move
is supposed to give unfair advantage to multinational
WTO failed to convince the USA and
European Unions to eliminate high tariff
on agriculture . In other words it defends high tariff on agriculture in USA
and EU. This would undoubtedly hurt the farmers in developing countries.
Developing Countries specialize in
producingprimaryproducts. i.e. agricultural products. They need some sort of
protection to diversify into other sectors of the economy at least in the short
term. Many developed nations used this tariff protection in the process of
their development . In this context WTO is criticised for being unfair and
neglecting the interest of farmers in developing countries.
WTO encourages import from certain
countries which produce the product
on a larger scale at the cost of
environment. WTO pushes for achieving increase in GDP without any regard for
environment. In the current environment of global warming and ever increasing environmental
disaster, utmost priority given by WTO on maximizing GDP at the cost of
environment is misplaced.
WTO is criticized for promoting the
domination of multinational companies whicharefearedtoeliminatelocalenterprises
from business world altogether. The growth of MNC’s is feared to ruin cultural
diversity of many developing countries.
WTO defends trade related intellectual
property rights which allow the firm to protect the patent and copy right. This
protection particularly in the area of manufacturing of drugs is supposed to
escalate the price of essential and life saving drugs. As a result people of
developing countries may not be able to buy costly drugs at affordable price.