Role of the WTO + Free Trade

Question 1

What is the role of the WTO?

Answer 1

• organisation, founded in 1995, which promotes free trade, ensuring trade flows as freely as possible, + solves trade disputes

Question 2

What is free trade?

Answer 2

• trade involving the removal of restrictions, such as tariffs, quotas + subsidiaries
• it helps global trade flow smoothly, overcome protectionism + seeks to remove inequalities in trade + unfair practices

Question 3

Describe how the WTO has been successful in promoting free trade.

Answer 3

• WTO has been overall successful bc avg. tariffs have dec by 90% since GATT was introduced + world trade has been inc at a faster rate than GDP
• it has promoted free trade by lowering restrictions, promoting trade reforms + establishing agreements to facilitate trade
• e.g. WTO has eliminated tariffs on >200 IT products + has resulted in the avg. global tariff rate dec from around 15% in 1995, to 5% in 2023
• it also provides a forum for member countries to negotiate trade agreements, which can lead to a reduction of trade barriers

Question 4

What are trade disputes?

Answer 4

• disagreements between countries, over products they trade

Question 5

Describe how the WTO has been successful in resolving trade disputes.

Answer 5

• successful bc members of trade disputes are obligated to not take unilateral action against other members + are expected to resolve dispute through WTO’s dispute-settlement system
• lead to >400 trade disputes being brought to WTO between 1995 to 2011, w < half resulting in the establishment of dispute panels as a large NO° was resolved through discussions between parties
• this helped to avoid trade wars + promoted stability in the global economy

Question 6

What are the problems of the WTO?

Answer 6

• protectionism is still an issue in some areas, esp in clothing, textiles + agri
• many M/LICs have criticised WTO for being too heavily influenced by the interests of USA + EU, + favouring HICs
• WTO needs to pay more attention to needs of LICs, so it’s easier for them to become involved in world trade
• LICs are pressurised to open their borders immediately to banks, telecommunication companies + other services in HICs
• e.g. India was forced to open its markets = food imports to quadruple, = a sharp dec in prices + rural incomes (e.g. price of coconut has dec by 80%) + foreign imports (e.g. palm old in Malaysia) to undercut local producers