The World Trade Organisation (WTO) is an international body whose purpose is to promote free trade by persuading countries to abolish import tariffs and other barriers. As such, it has become closely associated with globalisation. The WTO is the only international agency overseeing the rules of international trade. It polices free trade agreements, settles trade disputes between governments and organises trade negotiations.
WTO decisions are absolute and every member must abide by its rulings. So, when the US and the European Union are in dispute over bananas or beef, it is the WTO which acts as judge and jury. WTO members are empowered by the organisation to enforce its decisions by imposing trade sanctions against countries that have breached the rules. The general agreement on tariffs and trade was the predecessor of the world trade organisation.
The general agreement of trade and tariffs was formally set up in 1947 to operate on three levels 1. to create set of trading rules. 2. as an international agency for helping to resolve trade disputes 3. as a means for countries to get together to create freer trade and to cut down existing barriers.
The WTO was formed in 1994 to replace the GATT treaty under the Uruguay round of talks. The countries who signed into GATT agreed to go through a series of agreements called a round creating agreements to reduce certain tariffs. There have been nine trade negotiation rounds under GATT, one of which is still going on. The world trade organisation has agreements in the following areas Goods – this is where all of the trade agreements started. GATT was the forum where lower customs duties rates were negotiated as well as other barriers to trade across a whole range of areas from agriculture to textiles.
Services. – Banks, hotel chains, insurance firms and all other businesses who provide services are able to enjoy the same principles of free trade as those who trade in goods. Intellectual property.- These are rules and agreements related to trade in ideas and creativity. Rules refer to copyrights, patents, trademarks, names, designs, trade secrets and more.
Dispute settlement – The WTO has a procedure for resolving trade disputes and this is important as it provides a means for enforcing its rules in order to ensure that trade flows smoothly. Policy review – This is designed to provide a better understanding of the policies that countries adopt and to assess their impact. Cost implications of not meeting international agreements. If an organisation such as the WTO creates international agreements, it then has to set up a system of dealing with those who do not adhere to such agreements, so that where disputes between countries arise they can then be settled.
Settling disputes of trading countries and partners is at the heart of the role of the WTO. Disputes within WTO countries are all about countries who have broken promises and not stuck to international trading agreements. Put quite simply, a dispute arises when one country decides to adopt a form of trading that another WTO country feels is breaking a WTO agreement.
Settling disputes is all part of the responsibility of the dispute settlement body, and this consists of WTO members. This body establishes panels of experts to consider a particular case. It then has the power to authorise retaliation which may have severe cost implications for a country that does not comply with a ruling.
There are two main stages Stage 1 consultation for up to 60 days Before anything happens the countries that are involved in the dispute have to talk to each other to see if they can sort out all of the differences themselves. Stage 2 up to 45 days for the panel to be appointed and 6 months for the panel to conclude.
If the first stage fails, then the complaining country can ask for a panel to be appointed. The role of the panel is to help the dispute settlement body make rulings or recommendations. At the end of the panel a final report is submitted to both sides in the dispute and then it is circulated to all WTO members. If the panel decided that the dispute does infringe an international trade agreement. It will then recommend what the country has to do in order to conform to the rules. If it continues to break its agreements this may lead to trade sanctions, offers of compensation or fines. These things have a big impact on the country to trade.
Opportunities created by increasing international trade for the global community An argument for increasing international trade is a very important issue in life, creating jobs. If you create exports to other countries as well as increasing imports from other countries helps to increase the supply of goods and services which creates jobs not only at home but also in other countries.
Another good opportunity created through trade is to satisfy demand through imports. Importing allows other countries to supply consumers with goods that are cheaper to buy than if they were produced domestically. Importing allows us to eat things and wear different items from all over the world which help provide consumers with a greater choice a better way of life.
There is also an advantage created by increasing international trade for the global community as they also benefit from trade as the process of trade and international specialization reduces prices. Imports also help to reduce inflationary pressures which allow the industries to become more productive.
Another advantage is free trade. Free trade exists when there are no barriers to trade. Individuals, organisations and countries will specialise in the things they do best and will then sell the products of their labour. Some of the products imported into the UK could be produced in the UK but they should concentrate on producing those things that they are good at producing. In free trade the argument is that there is room for everyone to specialise in something.
As tariffs and other barriers are removed it provides real good trading opportunities in particular for the less economically developed countries. Dangers of increasing international trade Many people believe that free trade is good but there are also a lot of people who disagree. A lot of people feel that there are a lot of problems and issues that are associated with international trade.
For example where there are a lot of competitors from other countries. It is very hard for some infant industries to develop their market presence. They may have considerable value for an economy, but they just cant compete because of the foreign competition. In some cases foreign companies may get benefits that a UK company doest have. They may have subsides or other benefits given to them by the government and these things distorts their ability to compete fairly.
Another problem through the world that distorts international trade is child labour. There is child labour because children are living in poverty and need money to contribute to their families. Child labour is more apparent is less economically developed countries.
Many parents there decide to send their children to work where they can earn money rather than send them to school as there are not many schools there and the education is not very good. A lot of the time the conditions that the children work in are not very good and they work for many hours for little pay. Marks & Spencer has been accused by Indonesian workers' leaders of selling clothes made by child labourers working for less than 50p for a 10-hour day in factories around Jakarta.
The claim was made in London by an Indonesian trade union official and a labour rights adviser who have been collecting evidence about pay and conditions in textile factories supplying leading western retailers, including Marks & Spencer. Many of the world's biggest clothing firms have transferred production to the developing world to take advantage of low wages and are wrestling with the problem of how to deal with demands for minimum standards for workers in local factories and head off accusations of exploitation.
Marks & Spencer responded to the latest accusations by saying that it had no evidence it was buying clothing made in the factories named by the Indonesian labour activists. Vince McGinley, a Marks & Spencer divisional director, said the company, which is a member of the government-sponsored ethical trading initiative, would cancel any contracts with suppliers using child labour "in a heartbeat".
"We take these allegations very seriously, and if we find that the integrity of the brand has been brought into disrepute we will deal with it," Mr McGinley said. One industry source suggested that unauthorised subcontracting between different factories or fake labelling, which was common in Southeast Asia, could lie behind the claims.