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World Trade Organization (WTO): Relevance and Importance

World Trade Organization (WTO): Relevance and Importance

 

The World Trade Organization (WTO) is the global international organization dealing with the rules of trade between nations. It is governed by the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business.

WTO History                                                                          

The WTO's origins began with trade negotiations after World War II. In 1948, the General Agreement on Tariffs and Trade focused on reducing tariffs, anti-dumping, and non-tariff measures, following which the Uruguay Round of negotiations, from 1986 – 1994, led to the formal creation of the WTO. 

World Trade Organization was established on 1 January, 1995. It has its headquarters at Geneva, Switzerland and has 164countries as its members (as on October 2017)

In 1997, the WTO brokered agreements promoting trade in telecommunications services among 69 countries. It also removed tariffs on information technology products between 40 members. It improved trade of banking, insurance, securities and financial information between 70 countries.

The Doha round began in 2000. It focused on improving trade in agriculture and services. It expanded to include emerging market countries at the fourth WTO Ministerial Conference in Doha, Qatar, in November 2001. Unfortunately, the Doha talks collapsed in Cancun, Mexico, in 2003. A second attempt also failed in 2008 at Geneva, Switzerland.

Functions of the Organization

The World Trade Organization is a global membership group that promotes and manages free trade. The major functions of the organization are listed below:

  • Administering WTO trade agreements- WTO administers existing multi-lateral trade agreements wherein every member receives Most Favored Nation Trading Status. That means they automatically receive lowered tariffs for their exports. 
  • Forum for trade negotiations- It manages ongoing negotiations for new trade agreements. The most relevant example of this is the Doha Round in 2006. The negotiations led to easy trade relations among the member countries and provided the developing nations the much needed boost.
  • Handling trade disputes- WTO has a major role in settling trade disputes. Most conflicts occur when one member accuses another of dumping. Dumping means goods are exported at a lower price than it costs to produce it. The WTO staff investigates, and if a violation has occurred, the WTO will levy sanctions.

Apart from these major functions, WTO also provides technical assistance and training for developing countries, to reduce the economic gap within developing and developed nations.

Cooperation with other international organizations

The work of WTO is complimentary to other international organizations like IMF. A smoothly flowing trade helps reduce the risk of payments imbalances and financial crisis, which in turn is necessary to establish a sound and stable international financial ecosystem. Co-operation between international organizations like IMF and WTO is critical for enabling economic growth, raising living standards, and reducing poverty around the globe.

Relevance in current time

Questions have been raised time and again on the relevance of WTO, with the members not reaching to any conclusion on some of the important topics like food security etc. However, it shouldn’t undermine the key role the organization plays to stimulate economic growth of the countries and establish a stable international ecosystem with countries supporting each other.

Financial interdependence and development of small economies goes a long way in reducing a polar world and establishing peace and harmony. So in broad scope the work of organizations like WTO remains relevant and needs to be made more efficient to serve the bigger goal.

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