World trade organisation

Role of the WTO

Ensure trade flows smoothly, predictably and freely - more prosperous, peaceful and accountable economic world

• Trade negotiations

• Implementation and monitoring of trade

• Dispute settlement through negotiation

• Building trade capacity (by aiding developing nations)

• Outreach

Ensures consumers and producers have secure supply chains and greater choice

History of WTO

• 1945 End of WWII, world bank and IMF created

• 1947 General agreement on tariffs and trade (GATT)

  • created 45,000 tariff concessions/removed tariffs on manufactured goods

• Round 6 - anti-dumping (flood with low price to gain monopoly)

• Round 7 Tokyo 1979 - 102 countries joined

• Round 8 Uruguay 1994

THEN GATT replaced by WTO (broader scope)

• Doha round meant to cut protectionist barriers, reduce tariffs, increase ease of exports and imports

• NEVER CONCLUDED

Fail of Doha round

• Disagreements between developed nations and developing economies (concerned developing economies would be flooded with cheap imports of food and manufactured goods from developed nations)

• USA dislikes EU subsidies on agricultural production

• Concerns of west pharmaceuticals patents on life-saving medication

• New agreement needs all 164 countries to sign

Principles of WTO

• Most-favored nation: Countries can’t discriminate between trading partners - barriers must be lowered equally for all

• National treatment principle: Imported and local products must be treated equally once foreign goods have entered market

• Freer trade through negotiation: Lowering of trade barriers and reduction of red tape

• Predictability: Makes trade environment more stable, public announcement of policies

• Promotes fair competition: Fair conditions of trade to ensure free and open trade

• Encouraging development and economic reform: WTO allows developing countries flexibility and preferential treatment - ease transition to market-based economies

Criticisms of WTO

• Infant industry argument

• Harder diversification

• Environmental considerations

• Inequality + exploitation between developed and developing

• Ignore culture and social factors, hard to maintain culture diversity

• Undemocratic - richest benefit most

Infant industry argument - WTO criticism

States developing economies need more trade protection to develop manufacturing and economies of scale, WTO prevents this

Diversification WTO criticism

• Developing economies that specialise in primary products (like agriculture) need to diversify to other sectors

  • requires tariff protection, WTO prevents this

Environmental considerations WTO criticism

Free trade enables imports to be made from countries with least environmental protection - values maximisation of GDP instead of sustainability while increasing output from increased trade (use of natural resources and FoP)

Inequality + undemocratic WTO criticism

Wealthier countries benefit from exploiting workers in developing countries

• Structure enables richer to get what they want as they have more influence, benefit more

Benefits of WTO

• Conflict less likely, encourages negotiated settlement to disputes

• Low trade barriers = economic and trade growth

• Comparative advantage + Economies of scale

• Wider market = decrease costs + more competitive

• Increase allocative efficiency

Comparative advantage + specialisation WTO benefit

• Encourages countries to produce goods they have comparative advantage in, less opportunity cost and better global allocation of resources

• Specialisation = economies of scale, PPF shift outwards, productively efficient

Wider market = variety and competition WTO benefits

• Wider market means removed restrictions, growth + lower consumer prices = increase quality, decrease price

• Wider market = competition = allocatively efficient