The World Trade Organization (WTO) is an international organization designed to supervise and liberalize international trade. The WTO came into being on 1 January 1995, and is the successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1947.
The WTO deals with the rules of trade between nations at a near-global level; it is responsible for negotiating and implementing new trade agreements, and is in charge of policing member countries' adherence to all the WTO agreements, signed by the majority of the world's trading nations and ratified in their parliaments.
The WTO has 153 members, which represents more than 95% of total world trade.
The WTO is governed by a Ministerial Conference, which meets every two years; a General Council, which implements the conference's policy and is responsible for day-to-day administration; and a director-general, who is appointed by the Ministerial Conference. The WTO's headquarters is in Geneva, Switzerland.
The WTO's stated goal is to improve the welfare of the people of its member countries, specifically by lowering trade barriers and providing a platform for negotiation of trade. Its main mission is 'to ensure that trade flows as smoothly, predictably and freely as possible'.
Among various functions of the WTO, these are regarded by analysts as the most important:
- It oversees the implementation, administration and operation of the covered agreements.
- It provides a forum for negotiations and for disputes.
Additionally, it is the WTO's duty to review the national trade policies, and to ensure the coherence and transparency of trade policies through surveillance in global economic policy-making. Another priority of the WTO is the assistance of developing, least-developed and low-income countries in transition to adjust to WTO rules and disciplines through technical cooperation and training. The WTO is also a center of economic research and analysis: regular assessments of the global trade picture in its annual publications and research reports on specific topics are produced by the organization. Finally, the WTO cooperates closely with the two other components of the Bretton Woods system, the IMF and the World Bank.
The WTO oversees about 60 different agreements which have the status of international legal texts. These are some of the most important agreements:
- Agreement on Agriculture (central concepts are domestic support, market access and export subsidies)
- General Agreement on Trade in Services was created to extend the multilateral trading system to service sector.
- Sanitary and Phyto-Sanitary Agreement. Under this agreement the WTO sets constraints on members' policies relating to food safety as well as animal and plant health.
- Agreement on Technical Barriers to Trade. Its object is 'to ensure that technical negotiations and standards, as well as testing and certification procedures, do not create unnecessary obstacles to trade'.
As I've said the main function of the WTO is to ensure that trade flows as smoothly, predictably and freely as possible. The result is assurance. Consumers and producers know that they can enjoy secure supplies and greater choice of the finished products, components, raw materials and services. Producers know that foreign markets will remain open to them.
The result is also a more prosperous, peaceful and accountable economic world. Virtually all decisions in the WTO are taken by consensus among all member countries and they are ratified by members' parliaments. Trade friction is channeled into the WTO's dispute settlement process where the focus is on interpreting agreements and commitments, and how to ensure that countries' trade policies conform with them. That way the risk of disputes spilling over into political or military conflict is reduced.
By lowering trade barriers, the WTO's system also breaks down other barriers between people and nations. The WTO agreement are the legal ground-rules for international commerce. Essentially, they are contracts, guaranteeing member countries important trade rights. They also bind governments to keep their trade policies within agreed limits to everybody's benefit.
So it means that the WTO trading system has the following benefits:
1. The system helps promote peace.
2. Disputes are handled constructively.
3. Rules make life easier.
4. Free trade cuts the costs of living.
5. It provides more choice of products and qualities.
6. Trade raises incomes. 7. Trade stimulates economic growth.8. Governments are shielded from lobbying.
9. The system promotes good government 10.The basic principles make life more efficient.
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