13.1. World Trade Organisation

Question 1

The World Trade Organisation Introduction

Answer 1

• Founded in 1995 to replace the General Agreement on
  Tariffs and Trade (GATT), which was a multilateral agreement regulating international trade which began in 1948
• The only organisation that deals with the global rules of trade between nations.
• Headquarters in Geneva, Switzerland
• Has a loose, guiding aim to promote free trade across the globe and resist protectionism through a variety of measures.
• Currently there are 164 full members of the World Trade Organisation
• As of 2007, WTO member states represented 96.4% of global trade.

Question 2

Why was the WTO formed?

Answer 2

• GATT was formed to settle trade disputes during WW2 which then turned into WTO in 1995

Question 3

The World Trade Organisation’s Function

Answer 3

The WTO aims to:

• Provide the rules for trade in goods, services, inventions and designs - negotiated and signed by the member trading nations which bind governments to keep their trade policies within the agreed limits
• Promote global trade to reduce tariffs and other trade barriers for the mutual advantage of all members. It is against protectionism, but sometimes does support it
• Settle trade disputes between members.

Question 4

Guiding WTO principles

Answer 4

1) Non-discrimination
2) Openness
3) Stability, Predictability and Transparency = more trade
4) More competition
5) More benefits for LICS / MICs to increase trade
6) Protection for the environment

Question 5

Non-discrimination as a WTO principle

Answer 5

• Between member states and also between a country’s domestic products and services, and international products and services.
• Countries should not discriminate between its trading partners and should not discriminate between its own and foreign products, services or nationals

Question 6

Openness as a WTO principle

Answer 6

• Lowering trade barriers encourages trade

Question 7

Stability, Predictability and Transparency as a WTO principle

Answer 7

• Foreign companies, investors and governments should be confident that trade barriers will not be raised arbitrarily
• This encourages investment, job creation, consumer choice and lower prices
• WTO agreements require governments to make their trade policies transparent by notifying the WTO about laws in force and measures adopted

Question 8

More competition as a WTO principle

Answer 8

• WTO aims to discourage ‘unfair’ practices, such as export subsidies and dumping products below normal value to gain market share

Question 9

More benefit for LICs as a WTO principle

Answer 9

• Over 3/4 of WTO members are developing countries and countries in transition to becoming market economies
• Giving them more time to adjust, greater flexibility and special privilidges is intended to help them develop their trade
• WTO agreements contain special provision for developing countries, including longer time periods to implement agreements and commitments, measures to increase their trading opportunities and support to help them build their trade capacity

Question 10

Protection for the environment as a WTO principle

Answer 10

• The WTO’s agreements permits members to take measures to protect not only the environment but also public health, animal health and plant health

Question 11

The Most Favoured Nation Principle

Answer 11

• Under the WTO agreements, countries cannot normally discriminate between their trading partners.
  –> Grant someone a favour (such as a lower tariffs for one of their products) & you have to do the same for all other WTO members.
• This principle is known as most-favoured-nation (MFN)
  treatment. It is so important that it is the first article of the General Agreement on Tariffs and Trade.
• There are however closely controlled exceptions, such as establishing trade blocs or allowing LICs and MICs
  preferential access to an HIC market to encourage more
  trade between the developed and developing.

Question 12

Linking the WTO with the trend of trade

Answer 12

• WTO founded in 1995 and after that, global trade significantly increased
• But the relationship is complex.
• You need to be able to state that the WTO is one reason that there is more global trade and acknowledge that this is a positive impact of the WTO.

Question 13

WTO and Agricultural Food Subsidies

Answer 13

• Previously, it has been the policy of developed governments to subsidise certain industries in their own countries.
• This makes the products of these industries cheaper, and to therefore make them more competitive on a global scale.
• This has been the case with agricultural subsidies.
• How can we link this to an imbalance of global trade?
• In December 2015 the WTO struck a deal to abolish
  subsidies for all countries on agricultural export crops.
• Read the article and summarise it in your notes as an example of the good that the WTO can do.