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World Trade Organization
What is WTO?
external image WTO_LOGO-w.jpgWTO stands for World Trade Organization, it is the largest organization in the world, WTO oversees the global trade in goods and services. It is the only global international organization dealing with the rules of trade between nations. WTO is responsible for the dealing of agreements, negotiated and signed by the bulk of the worlds trading nations and ratified in their parliaments. Their goal is to help producers of goods and services, exporters, and importers conduct their business.

More specifically, the WTO's main activities are:
  • deciding the reduction or elimination of obstacles to trade
  • agreeing on rules governing the conduct of nternational trade
  • monitoring the enforcement of WTO's agreed rules for trade in goods, trade in services, and trade-related intellectual property rights external image wto_october_34923_340x260.jpg
  • reviewing the trade policies of our members, as well as ensuring transparency of regional and bilateral trade agreements
  • settling issues among our members regarding the interpretation and application of the agreements
  • building capacity of developing country government officials in international trade matters
  • assisting the process of adding the countries who are not yet members of the organization
  • conducting economic research and collecting trade data in support of the WTO's other main activities
  • explaining to and educating the public about the WTO, its mission and its activities

When was it initiated?
1970’s Tokyo Round – First big attempt to get rid of trade barriers (not including tariffs) and improve the system which meant some GATT rules had to be modified to “codes” because not all countries agreed with them

1986 Uruguay Round – Negotiations to: extend trading systems, reform trade in agricultural and textile sectors causing many GATT regulations to be reviewed.

1995 Final Act – The WTO was established based on the Marrakesh Agreement succeeding the General Agreement on Tariffs and Trade (GATT)

The main principles for this agreement include:

  • Goods: The General Agreement on Tariffs and Trade (including the GATT Trade Related Investment Measures
  • Services: the General Agreement on Trade in Services (GATS)
  • Intellectual Property Rights: Trade-Related Aspects of Intellectual Property Rights (TRIPS)
  • Dispute settlement (DSU)
  • Reviews of governments' trade policies (TPRM)

Why was it initiated (Problems)? What issues does it resolve?

Basic principles
  • To understand the origins of the WTO, it is important to look at it's predecessor organization: the GATT(the General Agreement on Tariffs and Trade)
  • In 1993 the GATT was updated to include new obligations upon its signatories which led to the creations of the WTO
  • The 75 existing GATT members and the European countires became the founding members of the WTO on 1 January 1995.
  • GATT' was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO)
  • The Bretton Woods Conference had introduced the idea for an organization to regulate trade as part of a larger plan for economic recovery after World War II.
  • As governments negotiated the ITO, 15 negotiating states began parallel negotiations for the GATT as a way to attain early tariff reductions and that overpowered the ITO
  • The GATT's main objective was the reduction of barriers to international trade through: the reduction of tariff barriers, quantitative restrictions and subsidies on trade through a series of agreements.
  • Since GATT was a treaty, not an organization, the functions of the GATT were taken over by the WTO


  • GATT was a set of rules agreed upon by nations, the WTO is an institutional body.
  • The WTO expanded its scope from traded goods to trade within the service sector and intellectual property rights
  • WTO arrangements are generally a multilateral agreement settlement mechanism of GATT.
  • The WTO would not only discuss trade barriers but other issues indirectly related to trade, including employment, investment, restrictive business practices, and commodity agreements.
  • The WTO encompasses the philosophies of the I.M.F (International Monetary Fund) created so that countries could exchange their currency for other currencies with little restriction on the trade and also helps countries that are facing high debts by giving them loans
  • The WTO also negotiate their policy on trade to create an institution that would regulate free trade between countries.

What are the outcomes and results (Solutions)?

“The Truth Behind the WTO”
Consider the following pros and cons of the outcomes of the WTO:
WTO is the best international organization to smooth and enhance trade relations in the globalised world.
Globalization is a fact and everyone needs to benefit from it through free trade
WTO encourages nations to liberalize their economies and promotes free trade
Nations benefit from increasing their levels of international trade
· Developing nations and LDCs have greater access to foreign investment and to the markets of wealthier societies
· Local economic sectors, such as coffee and textile production, become infused with capital
Foreign trade is a source of strong and consistent economic growth
· Developing nations know that joining world trading system, and not protectionism, relieves poverty
WTO membership creates more property rights and more debt relief
By stimulating world trade under a system of rules, the WTO helps fight government corruption
· Globalization gives them more trading possibilities and thus alternatives to dealing with corrupt government officials
· Corrupt countries become exposed and isolated, and their citizens may even be emboldened to rise in revolt
· When a nation prospers, its citizens become less tolerant of corrupt and/or autocratic regimes

WTO's formal structure creates transactional efficiency and promotes transparency and equity.
WTO rules are made and ratified by member states and contrary to rumor, multinational corporations have no role in negotiations
The WTO makes national trade policies more transparent with its Trade Policy Review Mechanism which can be viewed on their website (www.wto.org)

Developing countries have benefited from the WTO Agreements because:
· greater tariff protection on manufacturers in the poor countries
The purpose of the WTO is to facilitate the exploitation of individuals (especially in developing countries) by multinational corporations
Multinational corporations (MNCs) play a covert role in politics
They are accountable only to boards of directors and shareholders but lobby for policies from various levels of government
Globalization and free trade brings great disturbances (which are beyond the power of our elected officials) because of these the principles on which these corporations run

Globalization and free trade causes mass layoffs and huge income disparities. The WTO favours these economic systems and reforms will not alter its vision of free trade in the world.
While MNCs such as Wal-Mart, General Motors and Toyota each earn yearly revenues higher than the GDP of most nations, 2 billion people around the world live on less than $1 per day

WTO is undemocratic
At the Seattle Summit, the EU, Japan, Canada and the US met in secret closed committees while other nations weren't invited.

The WTO tramples the dignity and sovereignty of nations
WTO is comprised of an unelected body that governs world commerce. Local bodies cannot protect the environment and public health, democracy is damaged.
National development should be in the control of nations, not the WTO.
Link trade benefits with respect for workers.

Developing countries have not benefited from the WTO Agreements of the Uruguay Round because:
· market access in industry has not improved
· these countries have had no gains yet from the phasing out of textiles quotas
· non-tariff barriers such as anti-dumping measures have increased
· domestic support and export subsidies for agricultural products in the rich countries remain high

Decision making in the WTO is considered complicated, ineffective, unrepresentative and non-inclusive (existence of informal “steering” committees)

  • Purpose of the WTO is to stimulate economic growth around the world through the promotion of free trade
  • However, overlying consensus amongst the developing nations of the world is that the WTO does not manage the global economy impartially
  • Free trade promotes investment in countries other than one’s own, which is theoretically suppose to boost the economy and eventually the standard of living of all countries involved
  • However, investment in developing and less influential economies mostly comes from the developed and economically powerful countries
  • This system gives the investor an advantage
  • Regulations that facilitate the investment process are in the investor’s interest and helps foreign investors maintain an edge over local competition
  • The operations of the WTO create a systematic bias toward rich countries and multinational corporations as smaller countries which have less negotiation power
  • Free trade leads to a divergence instead of convergence of income levels within rich and poor countries (the rich get richer and the poor get poorer)
  • It is not a surprise that over the last two decades, immense wealth and prosperity have come for developed nations, at a time when most developing nations in the world have steeped into further poverty and debt
  • The policies of those countries who have the power and influence have been successful in raising their standard of living at a terrible cost
  • Rich nations, as well as poor, incur debts
  • Often the wealthier and more powerful countries are able to use various means to avoid getting into the debt crisis that the poorer nations are often experience
  • The US began to export its macroeconomic imbalances in 1973 by abandoning the system of fixed exchange rates established by the Bretton Woods Agreements of 1944
  • The floating exchange rate system provided a flexible and efficient monetary tool that enabled them to avoid the adjustments that would otherwise have been required by America’s new situation as a debtor
  • In a system of fixed exchange rates and gold convertibility, the US would have been obliged, like every third-world country today, to pay for its indebtedness with a relative loss of sovereignty and highly unpopular domestic austerity measures
  • Thanks to its political power and to the dollar, which was the world’s only reserve currency, the US was able to keep its monetary sovereignty intact
  • Its allies could not question American policy without destabilising the institutional fabric and the cold-war security system from which they derived undoubted benefits
  • In this way, the policies and working of the WTO had a signifcant impact on the international debt crisis

    In the news:

What's your opinion?



1. "WTO | Understanding the WTO - what is the world trade organization?." WTO | Welcome to the WTO website. 13 Nov. 2008 http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact1_e.htm.
2. "WTO | What is the WTO?." WTO | Welcome to the WTO website. 13 Nov. 2008 http://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm.
3. Huggz, Grizzly. "the truth behind the WTO." youtube. 7 July 2006. 14 Nov. 2008 http://www.youtube.com/watch?v=E1Oj7Hk31LY.
4. "WTO | Understanding the WTO - Overview: a navigational guide." WTO | Welcome to the WTO website. 14 Nov. 2008 http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm1_e.htm.
5. "WTO | legal texts - Marrakesh agreement." WTO | Welcome to the WTO website. 14 Nov. 2008 http://www.wto.org/english/docs_e/legal_e/04-wto_e.htm.

By: Michelle Fraser, Kara Ngo, Samah Rahman, Nupur Dogra