Origin of WTO
The General Agreement on Tariffs and Trade (GATT) was signed on January 1, 1948, liberating the world from high tariffs and other restrictions. Establishing a permanent body to promote free trade between countries is one of the most outstanding achievements of the GATT negotiations. This is one of the WTO's most important trade agreements. On January 1, 1995, the World Trade Organisation replaced the GATT organisation, which is why it is called the predecessor of WTO. The World Trade Organisation was established on 1 Jan 1995. It is the only global international organisation dealing with trade rules and regulations between different nations.
World Trade Organisation
GATT
Nature of World Trade Organisation
It deals with sales of trade between nations at the global level
It operates to liberalise trade and free flow of goods and services in the international market
Settles disputes through some neutral procedure
Ensures that the trade flows as smoothly and freely as possible
Roles and Functions
Helps in the economic growth of developing countries by giving them preferential treatment
Improving living standards and creating employment opportunities.
To increase income and effective demand, facilitating increased production and trade.
Ensure efficient use of the earth's resources for sustainable development and Promote an environment that encourages Member States to turn to the WTO to alleviate grievances
Establishing generally accepted codes of conduct aimed at removing barriers to trade, including tariffs, and eliminating discrimination in international trade relations
Acting as a Dispute Resolution Body Ensuring proper compliance with all regulations required by law for the Member States to resolve disputes
Role of the World Trade Organisation in the protection of consumers
The role of WTO in protection of consumers is discussed below in detail-
The WTO is a place where governments try to resolve trade issues facing them. The focus is on the WTO agreements that most of the world's trading nations negotiated and signed. But the WTO is not just about trade liberalisation. The rules could help maintain trade barriers, for example, to protect consumers, prevent the spread of disease, and protect the environment.
The World Trade Organisation's role is to facilitate international trade in goods and services, but that trade must be secure. This includes ensuring that consumers are not endangered by contaminated food and that imported goods do not carry exotic diseases or pests.
Drawbacks of WTO
The world trade organisation’s sole concern is to regulate and maintain the terms and conditions relating to trade and to verify governmental security only in the case of trade. Apart from that, the WTO is not otherwise responsible for ensuring national security.
The WTO has been long accused of being unfair to developing country governments. They act where powerful governments and big corporations make policy decisions. Under the WTO, it is inevitable that developing countries will suffer more from the disruption of trade agreements with other countries simply because they have less influence on the global economy.
The WTO encourages countries to maintain free trade around the world and encourages them to increase their trade in order to earn more. In the process, countries are creating more industries and technology companies that destroy the environment.
WTO Criticism
The following point explains the WTO criticism in detail-
International organisations have often been heavily criticised for supporting powerful countries and allowing them to exploit less developed countries. It has failed to address the problems of developing countries on many levels. Poor countries are sometimes forced to adopt so-called “free trade” practices by removing tariffs from the WTO and other international bodies. The WTO has a history of promoting "free trade" only when it benefits rich countries and promoting it to benefit poor countries is slow at best and slow at worst. Recklessly careless.
Several agreements on agricultural products and medicines have reduced access to food and medical care, resulting in many deaths.
One of the major disadvantages of WTO is that many policymakers tend to prefer more GDP growth due to trade products rather than the Environmental hazard it is creating.
Many criticise the WTO philosophy that the main economic goal is to maximise GDP. In an age of global warming and potential environmental disasters, perhaps the least important thing is an increase in GDP. The WTO should probably do more to promote environmental considerations. Free trade ignores cultural and social factors. National companies tend to reduce cultural diversity and overwhelm local industries and businesses.
The WTO has been criticised as undemocratic. The structure is claimed to allow wealthy countries to get what they want. They probably benefit the most. Progress is slow. Trade rounds were notoriously slow, and difficult to reach an agreement.
It is not unfair to conclude that the WTO can never claim to be acting in the interests of all its members unless the WTO undergoes fundamental structural changes. As long as the WTO is ruled by those in power, its actions will always be limited to serving the interests of those in power. On this basis, an ideal global trading system must consider the will of the people of WTO member countries. These countries must be able to impose their will through collective, democratic decision-making processes. Only then will the WTO be able to build a global trading system focused on the economic and social well-being of all its members.
Case Study:
Answer the following Questions-
When was the WTO established? WTO consists of how many members and where its headquarters is situated.
Explain in your own words which institution is not part of the world bank and why.
International Bank for Reconstruction and Development
World Trade Organisation
International Development Association
Ans.
The WTO was established in 1995. It consists of 164 members. It deals with sales of trade between nations at the global level and operates to liberalise trade and free flow of goods and services in the international market Like the GATT, the headquarters of the WTO is also situated in Geneva (Switzerland).
The World Trade Organisation is not part of the World Bank community. The World Bank Group consists of five institutions: the International Bank for Reconstruction and Development, ICSI, the International Development Association, the International Finance Corporation, and the Multilateral Investment Guarantee Agency.
Summary
The World Trade Organisation (WTO) oversees global trade rules between countries to support free trade and open markets. While many economists advocate free trade, politicians and voters argue that globalisation is unfair and undermines economic autonomy. There are many drawbacks of WTO. Free trade advocates argue that the WTO is unnecessary and even disruptive to markets. The WTO has a dark side. For years, critics have argued that the WTO is a vehicle for countries to engage in trade, war, and aggression against developing countries, an unnecessary and expensive layer on top of the natural market forces of international trade. Whether the organisation makes economic sense is questionable, but politically WTO is very important. And the government may continue to support the organisation, with or without citizen support.
FAQs on The WTO's Dark Side: Recognition and Impacts
1. What are the main criticisms against the World Trade Organisation (WTO)?
The main criticisms against the WTO often highlight a perceived bias towards developed nations and large corporations. Key points of contention include:
- Ignoring the needs of developing countries: Critics argue that WTO rules and policies often favour the interests of rich, industrialised nations, making it difficult for developing countries to protect their nascent industries.
- Undermining national sovereignty: WTO agreements can require member nations to alter their domestic laws on health, safety, and the environment to comply with trade rules, which some see as a loss of sovereignty.
- Lack of transparency: The decision-making processes, especially the dispute settlement mechanism, are often described as opaque and dominated by powerful countries.
- Harm to the environment: The pursuit of free trade is sometimes seen as prioritising commercial interests over environmental protection and sustainability.
- Impact on labour rights: The WTO has been criticised for not adequately addressing issues like child labour and workers' rights in its framework.
2. How have WTO policies negatively impacted developing countries like India?
For developing countries like India, the impacts of WTO policies have been a mixed bag, with several significant negative effects. For example, the requirement to reduce import duties and remove quantitative restrictions has exposed domestic producers, especially in the Small-Scale Industries (SSI) sector, to stiff competition from foreign goods. Furthermore, the WTO's Agreement on Agriculture (AoA) has been criticised for pressuring India to reduce agricultural subsidies, which are crucial for the livelihood of millions of small and marginal farmers, while allowing developed countries to maintain high levels of subsidies.
3. What is the "dark side" of the WTO concerning agriculture and subsidies?
The "dark side" of the WTO in agriculture refers to the perceived inequalities in the Agreement on Agriculture (AoA). Critics argue that the rules are structured to benefit developed countries. Developed nations are often able to maintain high levels of domestic farm subsidies (classified under a 'box' system that is permitted), which leads to the overproduction and dumping of cheap agricultural products in global markets. This makes it impossible for farmers in developing countries, who receive far less government support, to compete, thereby threatening their food security and livelihoods.
4. How does the WTO's TRIPS agreement create challenges for developing nations?
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) creates significant challenges by forcing developing nations to adopt stringent patent laws. A primary concern is access to affordable medicines. By extending patent protection for pharmaceuticals, the TRIPS agreement can delay the production of cheaper, generic versions of life-saving drugs. This raises healthcare costs and can make critical treatments for diseases like HIV/AIDS and cancer unaffordable for the majority of the population in poorer countries, prioritising corporate profits over public health.
5. Why is the WTO's dispute settlement mechanism often criticised for favouring powerful nations?
The WTO's dispute settlement mechanism is criticised because, in practice, it can be difficult for developing countries to use it effectively against powerful, developed nations. The reasons for this perceived bias include:
- High Costs: Bringing a case to the WTO requires significant financial resources and legal expertise, which developing countries often lack.
- Retaliation Power: If a smaller country wins a case against a large economy like the USA or the EU, its power to impose retaliatory trade sanctions is minimal and often ineffective. Conversely, when a powerful nation wins, its sanctions can be devastating to a smaller economy.
- Political Influence: There is a concern that informal political and economic power plays a role in influencing the outcomes, beyond the legal merits of a case.
6. Does the WTO genuinely help environmental protection, or does it prioritise trade?
This is a major point of debate. While the WTO's charter mentions the objective of sustainable development, critics argue that its actions often prioritise free trade over environmental protection. WTO rules can be used to challenge and strike down a country's domestic environmental laws if they are deemed to be an unnecessary barrier to trade. For example, a law banning a product made with an environmentally harmful process could be challenged as 'trade-restrictive'. This creates a conflict where nations may be forced to weaken their environmental standards to comply with WTO obligations.
7. What has been the specific impact of WTO policies on India's Small-Scale Industries (SSI)?
The impact on India's Small-Scale Industries (SSI) has been one of the most significant criticisms of WTO membership. Before the WTO regime, the SSI sector in India was protected by measures like reserving certain products for exclusive manufacture by SSIs and imposing high import tariffs. The WTO's push for trade liberalisation led to the removal of these protections. As a result, SSIs faced intense competition from cheaper, mass-produced imported goods, particularly from countries like China. Many uncompetitive units were forced to shut down, leading to job losses and economic distress in the sector.
8. Despite its criticisms, what are the commonly cited benefits of the WTO that fuel the ongoing debate?
The ongoing debate exists because the WTO does offer several theoretical and practical benefits that are weighed against its negative impacts. The primary stated advantages include:
- Promoting peace: By fostering trade and economic interdependence, the WTO aims to reduce the likelihood of conflict between nations.
- Lowering costs of living: Free trade can lead to lower prices for consumers on imported goods.
- Providing a dispute settlement forum: It offers a formal mechanism to resolve trade disputes, reducing the chances of a trade war.
- Boosting economic growth: By reducing trade barriers, it encourages an increase in trade volume, which can stimulate economic growth and employment.
The core of the "dark side" argument is that these benefits are not distributed equally and often come at a high social and environmental cost for developing nations.
