3.3 International Trade Organizations and Agreements

The World Trade Organization (WTO) is a key player in global trade. It was created in 1995 to replace GATT and promote free trade. The WTO's structure includes a Ministerial Conference, General Council, and specialized bodies that handle trade disputes and policy reviews.

The WTO's main job is to facilitate trade talks, implement agreements, and settle disputes between countries. It follows principles like non-discrimination and transparency to encourage fair trade practices. The WTO has helped lower trade barriers and boost economic growth worldwide.

World Trade Organization (WTO)

World Trade Organization structure and functions

Top images from around the web for World Trade Organization structure and functions

• 

  Ministerial Conference 2011 | Eighth WTO Ministerial Confere… | Flickr View original

  Is this image relevant?

• 

  World Trade Organization - Wikimedia Commons View original

  Is this image relevant?

• 

  The Role of Charismatic World Trade Organization and the Expansion of Free International Trade ... View original

  Is this image relevant?

• 

  Ministerial Conference 2011 | Eighth WTO Ministerial Confere… | Flickr View original

  Is this image relevant?

• 

  World Trade Organization - Wikimedia Commons View original

  Is this image relevant?

1 of 3

Top images from around the web for World Trade Organization structure and functions

• 

  Ministerial Conference 2011 | Eighth WTO Ministerial Confere… | Flickr View original

  Is this image relevant?

• 

  World Trade Organization - Wikimedia Commons View original

  Is this image relevant?

• 

  The Role of Charismatic World Trade Organization and the Expansion of Free International Trade ... View original

  Is this image relevant?

• 

  Ministerial Conference 2011 | Eighth WTO Ministerial Confere… | Flickr View original

  Is this image relevant?

• 

  World Trade Organization - Wikimedia Commons View original

  Is this image relevant?

1 of 3

• History
  • Established in 1995 succeeding the General Agreement on Tariffs and Trade (GATT)
  • Culmination of the Uruguay Round multilateral trade negotiations from 1986 to 1994 aimed at liberalizing global trade
• Structure
  • Ministerial Conference serves as the highest decision-making body convening every two years (Seattle, Doha)
  • General Council conducts day-to-day operations
    • Dispute Settlement Body resolves trade disputes between member countries through panels and appeals (US-China steel dispute)
    • Trade Policy Review Body assesses member countries' trade policies for transparency and compliance (US, EU, Japan)
  • Specialized councils and committees focus on specific trade areas (goods, services, intellectual property)
• Functions
  • Facilitates trade negotiations and agreements among member countries to reduce barriers and expand market access (Agriculture, TRIPS)
  • Administers and implements trade agreements to ensure member compliance and consistency (WTO Agreement)
  • Reviews and monitors member countries' trade policies to promote transparency and prevent protectionism (Trade Policy Review Mechanism)
  • Settles trade disputes between member countries through mediation, arbitration, and rulings (US-EU Airbus-Boeing dispute)
  • Cooperates with other international organizations to coordinate global economic policy (World Bank, IMF)

Trade Agreements and Principles

GATT principles and trade liberalization

• Key principles
  • Non-discrimination ensures equal treatment for all trading partners
    • Most-favored-nation (MFN) treatment requires countries to apply the same tariff rates to all trading partners (US, China, EU)
    • National treatment mandates equal treatment for imported and domestically produced goods in the market (cars, electronics)
  • Reciprocity encourages countries to mutually lower trade barriers and exchange concessions (US-China Phase One Deal)
  • Transparency promotes predictability and clarity in trade policies and regulations (tariff schedules, regulations)
• Provisions
  • Tariff reduction and binding commitments lower and lock in tariff levels through negotiations (Uruguay Round, Doha Round)
  • Prohibition of quantitative restrictions eliminates quotas on imports and exports (agricultural products, textiles)
  • Exceptions allow countries to deviate from GATT rules under specific circumstances (balance of payments, infant industries, national security)
• Impact on trade liberalization
  • Substantial reduction in average tariff levels from around 40% in 1947 to under 5% today
  • Expansion of global trade and economic growth through increased market access and competition (GDP growth, trade volumes)
  • Increased market access for goods and services through multilateral and bilateral agreements (ITA, GATS)

Regional trade agreements for economic integration

• European Union (EU)
  • Customs union eliminates internal tariffs and applies common external tariff (CET) to non-members (EU-Turkey Customs Union)
  • Single market allows free movement of goods, services, capital, and people within the bloc (Schengen Area)
  • Common policies harmonize trade, agriculture, and regional development across member states (Common Agricultural Policy, Structural Funds)
  • Promotes economic integration and trade among member countries leading to increased intra-EU trade (Germany-France trade)
• North American Free Trade Agreement (NAFTA)
  • Free trade agreement eliminated most tariffs and other trade barriers among US, Canada, and Mexico (replaced by USMCA in 2020)
  • Increased trade and investment flows within the region through market access and investor protections (US-Mexico trade, US FDI in Canada)
  • Facilitated cross-border supply chains and production networks in industries like automotive and electronics (US-Mexico auto industry integration)
• Benefits of regional trade agreements
  • Increased market access and trade opportunities for member countries through preferential treatment (US-Korea FTA)
  • Economies of scale and enhanced competitiveness through larger integrated markets (EU Single Market)
  • Harmonization of regulations and standards reduces trade costs and facilitates trade (EU CE marking, NAFTA rules of origin)
• Challenges of regional trade agreements
  • Trade diversion shifts trade from more efficient non-member countries to less efficient member countries (US-Canada trade diversion from Mexico)
  • Potential for regional trade blocs to undermine multilateral trade liberalization efforts at the WTO (EU, NAFTA, RCEP)

Developing countries in multilateral trade negotiations

• Challenges
  • Limited negotiating capacity and resources compared to developed countries hinder effective participation (African Group, LDCs)
  • Difficulty in implementing trade agreements due to institutional and infrastructure constraints (customs procedures, technical standards)
  • Asymmetric power relations in trade negotiations with developed countries lead to imbalanced outcomes (US-Chile FTA, EU-ACP EPAs)
  • Potential for trade liberalization to disrupt traditional sectors and livelihoods (agriculture, textiles, services)
• Opportunities
  • Increased market access for exports, particularly in labor-intensive and agricultural sectors (Bangladesh garments, Kenya flowers)
  • Potential for technology transfer and foreign direct investment through trade and investment agreements (China FDI in Africa)
  • Improved competitiveness and efficiency through exposure to international competition (India IT services, Vietnam electronics)
  • Special and differential treatment provisions in trade agreements address development needs (longer transition periods, technical assistance)
• Strategies for effective participation
  • Capacity building and technical assistance enhance negotiating skills and implement agreements (WTO Trade Facilitation Agreement)
  • Forming coalitions with other developing countries increases bargaining power (G20, African Group, ACP Group)
  • Advocating for development-friendly provisions in trade agreements (TRIPS flexibilities, S&DT, aid for trade)
  • Complementary domestic policies maximize benefits and minimize costs of trade liberalization (education, infrastructure, social safety nets)