The Wto Is an Institution That Promotes ‘free Trade’ but Not ‘fair Trade

‘The WTO is an institution that promotes ‘free trade’ but not ‘fair trade’.’

Introduction

The World Trade Organization is an international organization which regulates and promote international trade between nations. Prior to being accepted into WTO, countries members are to commit themselves to the rules and policies that WTO are supporting for.

WTO was formed in 1st January 1995 as a successor of General Agreement on Tariffs and Trade (GATT). WTO was a formation of the outcome of the Uruguay Round that was held by the General Agreement on Tariffs and Trade (GATT) during 1986-1994. Since then WTO has replace GATT as the world’s global trading body.

The purpose of WTO is to ensure that global trade can flourish freely and smoothly. With a set of governing rules that was stems from the Uruguay Round, WTO creates and establish the formal rules and platform for global trade among member countries. WTO currently sits with 162 country members that are made up of both developing and developed countries who have consented to the goals of WTO. With a central purpose of promoting trade liberalization, WTO constantly facilitates talks and negotiations between member countries on topics such as trade policies, tariff barriers to better foster cooperation in terms of international commerce.

Since then WTO been identified as an organization that supports free trade which aims to reduce trade barriers through various initiatives. (GOV.UK, 2013) Free trade in reference to this context refers to the “unrestricted purchase and sale of good and services between countries without the imposition of constraints such as tariffs, duties and quotas”. (Investopedia, n.d.) This resulted in a tendency for which developed countries are able to benefit unfairly due to a higher trade volumes because of the mismatch in resources and bargaining power possessed by them. Fair trade however is being defined as “a trading partnership, based on dialogue, transparency and respect that seeks greater equity in international trade”. (World Fair Trade Organisation , n.d.) Although WTO is committed to improve trade among member countries, its role has been questioned and criticism were raised in regards to WTO’s agenda in promoting free trade.

Through this paper, we will try to evaluate the following statement, “The WTO is an institution that promotes ‘free trade’ and not ‘fair’ trade. We will also examine WTO’s agenda and try to evaluate how country members from developed and developing countries are able to benefit from this international cooperation. We will lastly identify how relevant are the roles played by WTO and recommendations as to how they can stay relevant in today’s context.

Before understanding the impacts of the agreements formed by WTO for developing and developed countries. A clear idea would to be understanding what are the areas being addressed by these agreements.

WTO agreements generally extend itself across three domain, namely goods, services and intellectual property. The few agreements that would be covered would be The General Agreement on Tariffs and Trade (GATT), The General Agreement on Trade in Services

(GATS), Trade Related Intellectual Property Rights (TRIPS) and The Agreement on Agriculture (AoA).

The foundation of WTO is build according to the following principles. Firstly member country should not exercise trade discrimination among themselves and they are entitled to be treated equally in the basis of “Most Favored Nation” whereby they are able to demand for a favorable tariffs and tariffs should be the same across similar products to avoid having double standards. Trading policies between WTO members should aim to become more “free” through negotiations that reduces tariff barriers for goods and services. Trade barriers should not fluctuate drastically and should be made transparent to foreign stakeholders. Dumpling behaviors are also not allowed which prevents unfair competition between country members which can harm and damage domestic markets. Lastly is that WTO members should recognize that not all member countries are equal and special conditions and treatments are allowed for member countries to make adjustments to lower tariffs in a given period of time. (WTO, n.d.)

Unfortunately there isn’t any concrete enforcement to constantly keep country members in check of their behaviors as to not contravene WTO’s policies. Punishment usually comes in the form of future trade sanctions to deter undesirable actions.  

Ideology of WTO

To understand WTO agenda, one can first observe where WTO ideology stems from. WTO by nature of its agenda of liberalizing trade comes from the concept of neoliberalism. This ideology advocates that market will best perform when it is self-governed without intervention from non-market forces. (Makwana, 2006)

It could be argued that this ideology has indeed worked and benefited individuals however this approach failed to address the widening income disparity among countries. Also through this concept of liberalization of trade, most benefits are reaped by Corporations and multinational companies as they are able to continue to grow at the expense of developing countries and continue to push for their objectives. (Solanki, 2012)    

Hence this it is clear that WTO agenda are more skewed towards free trade and fail to address how fair trade is equally important especially for countries that are less developed. Given that majority of the big international bodies such as WTO, IMF and World Bank operates on similar objectives, it makes it difficult for developing countries to turn the other way and reject them.

Benefits from WTO to Developing Nations:

1. WTO Dispute Settlement Understanding

It is important for developing countries to access global market to aid their development efforts and growth. However in the global context, these countries are faced with challenges and threats from subtle protectionism policies from developed countries.

With that, WTO has its dispute settlement mechanism in place to tackle and manage such issues. This body provided assistance in terms of dispute settlements between conflicted member countries as developing countries usually lack the influential power and market size to deter undesired behavior. (Christina L. Davis, 2009)