WTO

What is WTO?

The World Trade Organization (WTO), headquartered in Geneva, Switzerland, is an international organization that oversees and regulates global trade. Established on January 1, 1995, the WTO is the successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1947. The primary aim of the WTO is to facilitate trade negotiations and ensure the smooth flow of goods and services across international borders.

History of WTO

The World Trade Organization's history can be traced back to the aftermath of World War II when the General Agreement on Tariffs and Trade (GATT) was established in 1947. The primary objective of GATT was to promote free trade by reducing trade barriers, such as tariffs and quotas, among member countries. In 1995, GATT was succeeded by the WTO, officially headquartered in Geneva, Switzerland, since its inception on January 1, 1995.

Over the years, GATT underwent several rounds of negotiations, known as GATT rounds, to address various issues related to international trade. One of the most significant GATT rounds was the Uruguay Round, which concluded in 1994. It led to the creation of the World Trade Organization as a successor to GATT. The WTO officially came into existence on January 1, 1995.

The WTO serves as a forum for member countries to negotiate trade agreements, settle disputes, and discuss trade policies. It operates on the principles of non-discrimination, transparency, and the promotion of fair and open trade practices. The organization provides a framework for its members to engage in multilateral trade negotiations aimed at reducing barriers and liberalizing trade.

The Doha Development Agenda, launched in 2001, was one of the major negotiation rounds conducted by the WTO with a focus on addressing the needs of developing countries. However, progress has been slow, and negotiations faced challenges, leading to the suspension of the Doha Round.

Despite challenges and criticism, the WTO plays a crucial role in facilitating international trade and resolving trade disputes. It currently has 164 member countries, as of my knowledge cutoff in January 2022, representing a significant portion of the global economy.

The WTO continues to be a central player in shaping the rules of international trade and fostering cooperation among nations, aiming to create a more predictable and stable global trading environment.

WTO Objectives and Functions:

The WTO serves multiple objectives aimed at fostering a transparent, fair, and predictable trading system. Its key functions include:

  1. Trade Negotiations: The WTO provides a platform for member countries to negotiate trade agreements, covering areas such as tariff reductions, market access, and trade in services.

  2. Dispute Resolution: The organization facilitates the resolution of trade disputes among its members through a structured dispute settlement mechanism. This ensures that trade conflicts are addressed impartially and efficiently.

  3. Monitoring and Review: The WTO regularly monitors the trade policies of its member countries to ensure compliance with agreed-upon rules. Periodic reviews help maintain transparency and identify potential issues.

  4. Technical Assistance and Capacity Building: The WTO provides assistance to developing countries, helping them build the capacity to participate effectively in international trade and implement WTO agreements.

  5. Trade Policy Review Mechanism: Member countries undergo regular reviews of their trade policies and practices, allowing for constructive dialogue and ensuring adherence to WTO principles.

Difference Between GATT and WTO

While GATT and WTO share the common goal of promoting international trade, there are key differences between the two:

  1. Scope: GATT primarily focused on reducing tariffs and trade barriers. In contrast, the WTO covers a broader spectrum of trade-related issues, including services, intellectual property, and agriculture.

  2. Legal Status: GATT was an informal arrangement, lacking a formal institutional structure. The WTO, on the other hand, is a fully-fledged international organization with a comprehensive set of rules and a dispute resolution mechanism.

  3. Enforcement: GATT relied on voluntary compliance with its provisions, leading to challenges in enforcement. The WTO, however, has a binding dispute settlement system that ensures members adhere to agreed-upon rules.

  4. Coverage of Services: Unlike GATT, the WTO addresses trade in services through the General Agreement on Trade in Services (GATS), reflecting the evolving nature of global trade.

Understanding the WTO and its evolution from GATT is essential for comprehending the dynamics of international trade and the mechanisms in place to facilitate and regulate it.

Open a free account and start investing

Top Mutual Funds

3Y Returns

Nippon India Mutual Fundimage

Nippon India CPSE ETF

AUM:  42,632 Cr
55.39
45.20
Kotak Mahindra Mutual Fundimage

Kotak Nifty PSU Bank ETF

AUM:  1,478 Cr
45.15
ICICI Prudential Mutual Fundimage

ICICI Prudential Bharat 22 ETF

AUM:  18,904 Cr
41.58
ICICI Prudential Mutual Fundimage

ICICI Prudential Bharat 22 FOF

AUM:  1,577 Cr
41.40
Get your portfolio reviewed for free

Popular Calculators