The Effects of the Wto on International Trade

1 January 2017

And some principles has been produced for service these wide ranges of agreements, the principles formed the basic multilateral trading system. Moreover, the WTO is designed for its member nations to negotiate trade agreements and organizes a Dispute Settlement Body to oversee procedure for specific trade disputes between countries. The WTO also creates principles for promoting the development of multilateral trading. For insistence, the principles of non-discrimination, lower trade barriers, transparent and competitive policies are beneficial for the multilateral trading system.

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Inevitably, the WTO performs a variety of functions which include managing WTO trade agreements, organizing trade negotiations, supervising state trade policies, technical assistance for low developing countries and dispute settlement, etc. 2. 2 The Ministerial Conferences and decisions The ministerial Conference is the top decision-making institutions in the WTO. The Seattle meeting in 1999 was intended to initiate a new trade liberalization round and aimed to services and agriculture. In this meeting, industrialized countries had an argument with developing countries on core labour standards and environmental policy.

The intension occasion caused the failure of the conference. A new round of multilateral trade negotiations was hold in Doha in 2001. It added the issues of labour standards, environmental protection and competition policy in this conference. The Doha Round took more focuses on developing countries and made them more forcefully. It was included proposals for reducing tariffs and adjusting subsidies. The Doha Round put the issues of labour standards and the environment for future consideration. From there, the awareness of environment protection and humanitarian has emphasized by governments and firms.

Furthermore, this issue became a critical controversy in the WTO affaires during this long term. Whether these issues should be put in the trade policy has been in dispute. For example, those in favour of trade liberalization believe these issues should be separated from trade even though they are important. On the other side, environmentalists and commercial organizations argue for the inclusion of environment protection cover about global warming limitation and labour standards in trade policy. Fortunately, the labour standards including child labour have put in human rights principles gradually. Morrison, 2006, pp. 332-335) 3. The overall performances of the WTO on global trade 3. 1The WTO’s failures One of the biggest shortages of the WTO is its real problems in its Decision-Making. The WTO’s decision-making has developed of informal discussion in smaller groups. Some of the meetings only refer to small group of the main members in the now notorious ‘Green Room’; others are the regional groupings. So its transparency comes under question and most of the developing countries feel them being injustice treatments. In reality, total ransparency can never be achieved because of different national interests countries have. The U. S. economist Andrew Rose argues there no strong evidence can prove that the WTO has motivated trade. Furthermore, some failures of the WTO that the critics said are including: industrial countries restricted exports of developing countries for more than 30 years; it has achieved little trade liberalization in services; dumping, safeguards and subsidies rules in the WTO have been abused and Trade-Related Aspects of Intellectual Property Rights (TRIPS) rules are not liberalize enough.

From the perspective of procedures, the WTO can just make narrow or controversial decisions due to its slow systems of international negotiation and requirement for same opinions. In addition, the WTO has been shaky on dealing with the increased trade protectionism. Generally, it was concluded that the WTO effects on trade flows are not statistically significant, while Preferential Trade Agreements (PTA) produce strong but uneven. (Rose 2005)

Then lastly, the following facts have proved that the recent liberalization rules of trade have caused intensive poverty and inequality on the poorest nations and have damaged their democratic principles to a great extent. For instance, the average income in 59 countries is lower today than 20 years ago; the gap of the income in the less rich countries and poorest ones in 2000 has two times than1960; (United Nations Human Development Report, 1999) 3. 2 The benefits of the WTO on free trade and other social issues Although the WTO has contains a minor flaw. It really has made great contributions to the international trade development.

Most of the negative effects such as the increased poverty in the poorest countries have encouraged the WTO to adjust its liberalization of trade policies to reach its objectives. Basically, the WTO has made great efforts to help promote free trade by planning the rules of international trade. Besides, the WTO has also created a strong ability of policy-making and institutional reforms in transition nations. The significant benefits of WTO member nations can gain from a better market access, improved management and dependence on better economic policies. (Bacchetta, 2002)

On the other side, it said that the WTO trading system made a great number of positive effects, even though carried a minor flaw. These benefits has been described 10 points, they are: • improved world peaceful; * Satisfied dispute settlement; * Created a more lower costs of life by the freer trade • Made an easier life for the world; * Provided more products and services for choosing; • Increased income; • Motivated economic development and employment growth; * Produced a more efficient life; * Protected governments from lobbying; * Created better government. For instance, the WTO members can achieve tremendous value from it.

There is a historical trend of goods trade by some economic groups in 2000-2010 show in Appendix 1. It reflects the rapid rise in the overall trend; especially the Africa countries achieved a huge increased percent. Specifically, these countries can automatically gain Most Favored Nation status, which means they have to make each other at an equal position, and no preferential trade preference can provide. In addition, the lower trade barriers (e. g. tariffs, import quotas and excessive regulations) for the WTO members has created a more open market, increased sales, more employment opportunities and promoted the economic growth.

The large proportion of the developing countries in the WTO as well as reduce their competitive stress with the WTO’s assistance. The example of China will be discussed as following section. Moreover, the WTO is significant to deal with conflicts, although recent issues always take more focuses on its role of liberalize bilateral trade (Rose, 2004; Gowa and Kim, 2005; Goldstein et al. , 2007). An effective dispute settlement system can block serious trade conflicts and address the foundation for liberalization assurances. The dispute settlement mechanism of the WTO has been used for dissolving more than 300 trade disputes.

The WTO mechanism helps solve these disputes harmoniously and constructively. On the other side, the rules of the WTO trading system are often complained by environmentalists, they said it keeps governments from pursuing forceful environmental protection policies. There is no doubt that the increased global economic can cause much environmental damage. So the WTO makes efforts to build a proper mechanism to balance between the two. It has given a clear space to the boundaries to restrict trade to protect the environment. For example, the sustainable development has been set as one of the basic objectives of the WTO in the Marrakech Agreement.

The Agreement on Agriculture and the General Agreement on Trade in Services (GATS) also makes provisions to achieve this objective. The WTO also has made some practical contributions on promoting sustainable environment development. For instance, in order to respond to the complaint from 4 Asian countries in 1997, the WTO ruled that it was a legitimate environmental aim to protect sea turtles, pointed out the U. S. policies and approach were unacceptable because of lacked negotiations and the U. S. did not put all the foreign exporting countries at a same position. Then the U. S. hanged its discriminatory articles, took account of turtle protections terms and started to negotiations with the countries influenced by its law. Finally, the U. S. accepted the WTO’s rules about protection of sea turtles. It was also a successful case to respond to the WTO’s disputes settlement system. In addition, the WTO fights protectionism by its own ways. Protectionism is defined as an economic approach of restraining trade between countries which designed reasonable as ‘fair competition’ by adopting tariffs methods, restrictive imports quotas, and a large number of other government rules. Hills.

C. A (2007) mentioned the WTO has promoted trade liberalization and fights against protectionism through its rules and policies on trade, disputes settlement system, trade negotiations rounds and accession process. From Adam Smith’s Absolute Advantage Theory and comparative advantage theory to present new trade system, competition policies are playing an important in role in the international trade. Competition policy is defined as government policies and rules aimed at building competition and maintaining the same. It includes measures intended to promote and ensure competitive market conditions.

There is no doubt that the WTO has produced effective competition policies help to ensure that the benefits of liberalization and market-based transformations flow through to all. It designed “antitrust” or “anti-monopoly” laws for adopting by its members. 3. 3 Analysis of the WTO and China The WTO’s door opened for China on December 11th 2001 and the accession has boost Chinese economy, made great change on its legal and government issues. The analysis of China accession for the 10 years shows as following. In order to entry the WTO, China had to make less tightness of more than 7,000 tariffs, quotas and other non-tariff trade barriers.

In general, its GDP has got 4 times than it produced in ten years ago, and the volume of exports has risen almost 6 times to roughly $1. 57 trillion than 10 years before. The more opening market in China also has attracted an increasing number of foreign direct investments (FDI) and this in turn, the FDI can win great returns from the Chinese market. The role of the membership of the WTO has provided an assurance for foreign investors that China also has to obey the rules and policies of the international trading system. Inflows of FDI increased from almost zero in the early 1990s to $108 billion in 2009.

For example, as the single largest trading partner of China, American FDI has gained returns of 13. 5% in China, compared with worldwide rate of 9. 7%. Sales of merchandise increased from $10 billion to $545 billion during the period between1990 and 2009. There is a table of Chinese overall trade statistics since its accession show as Appendix 2. Just as the positive implications of WTO on China’s economic development, China’s entry has facilitated the trade between developing nations and these nations have played increasing significant roles in the international trade.

The other developing countries in the WTO such as India and some African countries have made progress since their accession as well as China. 4. Conclusion Through reviewing the information of the WTO’s principles, decision-making methods, it can be learned about the WTO is an important international organization even if it has not done well in each side. For a few years, the discussion about the WTO’s effects was a controversial issue. In general, whether its implications on international trade and other areas are good or not, it will be an issue need to stand the rest of time. Word count: 2020 Bibliography:

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