Definition
The World Trade Organization (WTO) is an international body that deals with the global rules of trade between nations. Its primary goal is to ensure that trade flows as smoothly, predictably, and freely as possible. The WTO negotiates and administers trade agreements between member countries, provides a forum for trade negotiations, monitors national trade policies, and assists in the resolution of trade disputes. Established in 1995, the WTO succeeded the General Agreement on Tariffs and Trade (GATT) and embraces its principles.
Key Functions of the WTO:
- Administration of Trade Agreements: Supervise and administer agreed-upon trade agreements.
- Forum for Trade Negotiations: Facilitate negotiations between member countries to further liberalize trade.
- Dispute Settlement: Provide a mechanism for resolving trade disputes that arise between members.
- Monitoring Trade Policies: Regularly review national trade policies and publish findings to ensure transparency.
- Technical Assistance and Training: Offer support and training to developing countries to help them build their trade capacity.
Examples
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Dispute Resolution: One of the WTO’s prominent roles is to adjudicate disputes between member nations. For example, the longstanding trade conflict between the USA and the EU over subsidies to aircraft manufacturers Boeing and Airbus was resolved through WTO’s dispute settlement process.
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Trade Agreements: WTO facilitates multiple trade negotiations and agreements. The Trade Facilitation Agreement (TFA) which came into force in 2017, aims to expedite the movement, release, and clearance of goods across borders.
Frequently Asked Questions
Q1: How does the WTO resolve disputes between countries? A: The WTO has a structured process for dispute resolution called the Dispute Settlement Understanding (DSU). It involves consultations, panels, and appellate reviews. If a member country believes another member is violating a trade agreement, it can request consultations to resolve the issue amicably, failing which a panel is formed to adjudicate, followed by an appellate review if required.
Q2: How are WTO decisions enforced? A: WTO decisions are binding on member countries. If a country does not comply with a ruling, the complaining country can be authorized to take retaliatory measures like imposing trade sanctions until compliance is achieved.
Q3: What is the relationship between WTO and GATT? A: The WTO replaced the General Agreement on Tariffs and Trade (GATT) when it was established in 1995. While the WTO is broader in scope, addressing not just goods but also services and intellectual property, it continues to embrace GATT’s foundational principles of promoting free and fair trade.
Q4: How many members are in the WTO? A: As of 2023, the WTO has 164 member countries.
Related Terms
General Agreement on Tariffs and Trade (GATT)
A multilateral agreement regulating international trade, established in 1947, and later absorbed into the WTO framework. GATT aimed to reduce tariffs and other trade barriers.
Trade Facilitation Agreement (TFA)
A WTO agreement aimed at simplifying, modernizing, and harmonizing import and export processes, which entered into force in 2017.
Dispute Settlement Understanding (DSU)
A legal and administrative system within the WTO that provides a structured process for resolving trade disputes between member countries.
Most Favored Nation (MFN)
A principle obligating WTO members to treat trade partners equally, ensuring that any trade advantage given to one country must be extended to all other members.
Trade Policy Review Mechanism (TPRM)
A process established by the WTO to monitor and analyze the adherence of WTO members to international trade agreements and their respective trade policies.
Online Resources
Suggested Books for Further Study
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“Understanding the WTO” by World Trade Organization
- A comprehensive guide provided by the WTO that explains its work and functions.
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“Trade Policy Review Series” by WTO
- Books providing insight into the trade policies of individual WTO members.
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“The World Trade Organization: A Very Short Introduction” by Amrita Narlikar
- Offers a concise yet informative overview of the WTO and its role in the global trade system.
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“Free Trade Under Fire” by Douglas A. Irwin
- Discussions on trade policies, agreements, and their implications featuring a section on the WTO’s impact.
Fundamentals of World Trade Organization (WTO): International Business Basics Quiz
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