Harry Bindloss

WORLD TRADE ORGANISATION (WTO)

WTO: The World Trade Organisation is a multi-lateral organisation and is the only global international organisation dealing with the rules of trade between nations. Their main goal is to promote free trade. The goal of the WTO is to help producers of goods and services, exporters, and importers conduct their business, therefore allowing nations to experience the gains from specialisation and trade that the theory of comparative advantage will arise. The WTO is biased to LEDCs A WTO committee is assisted by a sub-committee of LEDCs. They look at developing countries special needs. Its responsibilitys includes implementation of the agreements, technical cooperation, and the integration of LEDCs into the global trading system.

Advantages of the WTO The system helps promote peace Disputes are handled constructively Rules make life easier for all Free trade cuts the costs of living It provides more choice of products and qualities Trade raises incomes Trade stimulates economic growth The basic principles make life more efficient Governments are shielded from lobbying The system encourages good government

Disadvantages of the WTO Unrealistic Policy - Free trade policy is based on the assumption of laissez-faire or government non-intervention. Its success also requires the pre-condition of perfect competition. However, such conditions are unrealistic and do not exist in the actual world. Non-Cooperation of Countries - Free trade policy works smoothly if all the countries cooperate with each other and follow this policy. If some countries decide to gain more by imposing import restrictions, the system of free trade cannot work.

Harry Bindloss

Economic Dependence - Free trade increases the economic dependence on other countries for certain essential products such as food, raw materials, etc. Such dependence proves harmful particularly during wartime. Political Slavery - Free trade leads to economic dependence and economic dependence leads to political slavery. For political freedom, economic independence is necessary. This requires abandonment of free trade. Dumping - Free trade may lead to dumping where goods are sold at very cheap rates and even below their cost of production in order to capture the foreign markets. Harmful Products - Under free trade, injurious and harmful products may be produced and traded. Trade restrictions are necessary to check the import of such products. Harmful to Less Developed Countries - Free trade is harmful for the less developed countries for the following reasons: Competition under free trade is unfair and unhealthy. The less developed countries find it difficult to compete with the economically advanced countries. Under free trade, gains of trade are unequally distributed depending upon the level of development of different countries. The terms of trade are favourable for the developed countries, and unfavourable for the poor countries. Less developed countries generally experience unfavourable balance of payments. The problem of un-favourable balance of payments cannot be solved under free trade policy. The less developed countries cannot protect their infant industries under the policy of free trade. Free trade may endanger economic and political independence of the backward nations.

Evaluation of the WTO WTO rules allow for regional reductions in protectionism This has led to an increase in trading blocs NAFTA ,EU Increased non-tariff barriers You cant prove them so they are difficult to stop Since WW2 there has been a reduction in tariffs More general understanding, Asia opening up, Iron curtain falling. WTO rules allows for special exemptions If a country proves an economic emergency then they can put up tariffs. The role of TWO is very important during recessions Stop too many countries using protectionism, promote free trade

Harry Bindloss

Some poorer countries are allowed to join with existing protectionism measures. E.g. India joined with tariffs still in place. Uses the system of Most favoured nation - Biased to LEDCs Multilateral There is no world government, relies on negotiations, cant be enforced Many link WTO and Globalisation Loss of culture