Important Organizations related to Trade and Commerce: WORLD TRADE ORGANIZATION

  • World Trade Organization is a global intergovernmental organization that acts as the regulator in international trade among its member countries.
  • On 15th April 1994, 123 nations of the world signed Marrakesh Agreement which led to inception of the WTO.
  • Following the Marrakesh Agreement, WTO came into existence on 1st January 1995.
  • As of now it has 164 members. WTO is the largest international economic organization in the world.
  • The core purpose behind establishment of WTO is to ease international trade and provide a platform to members to negotiate and settle trade agreements and disputes.
  • Hence, WTO acts as intermediary as well as arbitrator between nations engaged in international trade with one another.

Role of WTO in International Trade:

  1. To provide a platform for negotiation of Trade Agreements among member countries
  2. To act as Arbitrator in case of any trade dispute between nations
  3. Formulation and implementation of Trade Policy
  4. Formulation and implementation of rules related to settlement of disputes
  5. To work in liaison with other international trade organizations like International Monetary Fund, World Bank, United Nations etc. to form and implement international trade policies which are coherent with global economic policy making
  6. Research and Analysis: WTO is also a centre for Research related to emerging issues and trends in global trade arena
  7. Support to Developing Economies: WTO works in the direction of supporting developing economies to increase their trade opportunity, build trade capacity, and helping with developing technical capabilities through its policy measures

Major Reason behind disputes in International Trade:

  • There can be numerous reasons behind disputes in International trade. However, there are some common issues which are prone to conflicts in the course of international trade. Such issues are listed below:
  1. Violation Of Intellectual Property
  2. Trade Barriers
  3. Subsidies
  4. Protectionism

Dispute Resolution by WTO:

  • Dispute Resolution amount member nations in the course of international trade is done in a systematic and rule based method. In 1994, the WTO member nations agreed upon a dispute settlement framework called “Understanding on Rules and Procedures Governing the Settlement of Disputes” (aka DSU). The approach of dispute settlement is multilateral rather than unilateral. This implies that if any member nation is found to be violating the trade rules laid down by WTO, they will act in accordance with a multilateral system of dispute resolution rather than taking action themselves.
  • A penal is appointed by WTO for each dispute which may be known as Dispute Settlement Body or Dispute Settlement Penal. The DSB consists of:
  1. Appellate Body
  2. Director-General
  3. WTO Secretariat
  4. Arbitrators
  5. Other Subject Matter Experts

Agreements of WTO:

  • Agreements are the set of rules framed by WTO for its member nations. The member nations must sign and abide by these agreements or rules while engaging in international trade. These agreements enjoy legal status in the international trade community. Though there are 60 different agreements, Some of the major agreements are covered here:
  1. General Agreement on Tariffs and Trade (GATT): Covers matters related to goods trade
  2. General Agreement on Trade in Services (GATS): Covers matters related to Services trade
  3. Agreement on Trade Related Aspects of Intellectual Property Rights: Regulates Intellectual Property related matters among nations

WTO Trade Principles:

  • The rules and regulations (aka Agreements) framed by WTO are based on certain principles. These principles are at the heart of WTO for government of international trade practices. These principles are provided below:
  1. No Discrimination: This principle forbids a nation from adopting the tendency favoritism in international trade. This means, a member must have similar trade terms with all other member nations. It cannot grant special favor to one nation while ignoring the interest of other members.
  2. National Treatment: The goods manufactured domestically and those imported from member nations must be treated equally by national government. This principle is particularly relevant in respect of imposition of non-tariff barriers by the governments.
  3. Transparency: The member nations must publish their trade policies from time to time. Similarly, they must notify to all members regarding any changes in the trade policy. A member can request another member to disclose required information related to trade policy.
  4. Safety: In certain circumstances, the restrictive trade policy is allowed by WTO. The members are allowed to adopt restrictive trade policies in certain circumstances related to protection of environment, public health and biodiversity of the nation.

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