The World Trade Organization is a Multi-lateral organization which facilitates the free flow of goods and services across the world and encourages fair trade among nations. The result is that the global income increases due to increased trade and there is supposed to be overall enhancement in the prosperity levels of the member nations. To put it in brief WTO encourages a multi-lateral trading system within its member countries. Origin and Evolution of WTO: – GATT to Uruguay
WTO is of a very recent origin, it came into formal existence on January 1st 1995. As an organization it has vast powers and functions than what its predecessor GATT (General Agreement on Tariffs and Trade) had, the objectives and goals of both being broadly the same. GATT came into existence in the year 1948, after long negotiations to form an organization called ITO immediately after the Second World War did not materialize.
The ITO was supposed to be the third international organization in the “Golden Triangle” that was supposed to come into existence, the first two being IMF and World Bank. To begin with 23 countries became founding GATT members (officially, “contracting parties”). GATT remained the only multilateral instrument governing international trade from 1948 until the WTO was established in 1995. There were several controversies on whether the GATT had actually contributed to enhancement of world trade and did it serve its purpose of a multi-lateral trading organization.
The liberalization of international trade during GATT era in its true sense was always debatable. However, it is very clear that over the period of 47 years of its existence, GATT was successful in initiating a process of tariff cutting in several groups of manufactured goods.
Moreover the signatories in the GATT increased from 23 to more than 100 in a short span, ratifying the fact that being in the system was proved and considered more beneficial than not being in it. On the other front, the internal and domestic economic problems and fluctuations made some economies to go back to increase the levels of protection and increase trade barriers to enable faster domestic growth and recovery. The problem was not just a deteriorating trade policy environment, but some other serious issues.
GATT negotiations did not include services and agricultural trade in its gamut. As the world trade grew in size, the share of services trade along with that of merchandise started to increase leading to the insufficiency of the GATT principles to cover the expanding aspects of ever evolving global trade. As a result, these loopholes were taken as advantage by many trading countries, resulting in a lopsided development of world trade. These and other factors convinced GATT members that a new effort to reinforce and extend the multilateral system should be attempted. That effort resulted in the Uruguay Round, the Marrakesh Declaration, and the creation of the WTO. WTO – Some Basic Facts:
Location: Geneva, Switzerland
Established: 1 January 1995
Created by : Uruguay Round negotiations (1986-94)
Membership: 148 countries (as of April 2005)
Budget: 155 million Swiss francs for 2003
Secretariat staff: 560
Head : Director-General, Supachai Panitchpakdi
What are its Objectives and Functions?
The overriding objective of the World Trade Organization is to help trade flow smoothly, freely, fairly and predictably; to meet its objective WTO performs the following functions Administering W.T.O Trade Agreements.
Acting as a Forum for trade negotiations.
Settling and Handling Trade disputes
Monitoring and reviewing national trade policies,
Assisting the member in trade policies through technical assistance and training programmes Technical assistance and training for developing countries. Co-operation with other International Organization
What are its Principles?
The agreements of WTO cover everything from trade in goods, services and agricultural products, these agreements are quite complex to understand, however all these agreements are based on some simple principles; Non-Discrimination