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World Trade Organization Affect on International Trade

Introduction

The two primary functions of the WTO are to provide a forum for trading partners to negotiate legally binding rules to govern international trade liberalization, and to settle disputes among members related to the implementation and interpretation of those rules. The WTO was established in 1995 as the organization responsible for housing and servicing not only a revamped version of its predecessor, the 1947 General Agreement on Tariffs and Trade (GATT) but also a host of new international trade-related agreements. These new agreements, which emerged from the Uruguay Round of GATT negotiations, cover such areas as trade in goods, services, textiles, and agriculture, as well as rules for dispute settlement and intellectual property protection, among many trade-related topics (Braithwaite, 161).

The core principle of the WTO is nondiscrimination. This means that all WTO member governments must treat each other equally with respect to international trade. In this context, most-favored-nation treatment means WTO members cannot offer special terms of trade, such as lower tariffs, to one trading partner over another. Similarly, national treatment means that WTO members cannot discriminate between their own products and those imported from other member states. Although there are some exceptions to the principles of nondiscrimination—for example, to facilitate developing-country market access—the WTO agreements only permit these exceptions under strict conditions.

World Trade Organization (WTO)

The WTO came into being in 1994 when a group of countries agreed to make a international forum for trade dispute settlement, and they signed on the agreement which defined the procedures and rules which would govern the Settlement of Disputes (DSU) among the member countries. The member countries agreed that, if they thought that if any fellow member country is violating trade rules, they would go for the multilateral system of dispute settlement, instead of taking action against them unilaterally (Beder, 52).

Advantages of WTO

Lower prices of commodities

Greater competition in the global markets leading to betterment in quality.

Disadvantages of WTO:

The free trade policy of WTO was perceived to be beneficial for all countries as it would promote trade between countries, but over the years it has only benefited the rich countries because poor countries can't compete against the rich countries and therefore this policy is increasing the gap between rich and poor countries.

Another disadvantage of WTO is that the rich and powerful countries of the world have a great influence on the WTO decisions. (Steinberg 2002)

Basic Principles of WTO

Liberalization / Removing Barriers to Trade

The objective of WTO is to eliminate barriers to trade. A distinction is made ??between obstacles tariff barriers (tariffs) and non-tariff barriers such as import licensing and export subsidies and prescriptions discriminatory requirements regarding safety, environmental protection and consumer health. If negotiations are to liberalize trade previously focused primarily on reducing tariffs, since the creation obstacles non tariff. WTO (1995), they focus on NTBs.

Reciprocity

Negotiations within the WTO are governed by the principle of reciprocity, namely that concessions on a reciprocal basis must be equal and balanced. Developing countries ...