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Major Components of the World Trade Organization

11 Sep 2017Economics Essays

The process of trade has been a part of history since the development of mankind and it is essential for mankind and independent states to trade to obtain necessities and commodities. Most importantly, come into question the rules of trading and what is appropriate in the process of trading. As a result, politics are the building stones for regulating international and domestic trade, so politics and economics are a marriage that could not be dissolved. Since the international system is complex and involves the participation of many countries with different products and economic models, disputes are always on a constant rise especially toward countries who have more powerful economically than those of Less Developed Countries (LDCs).

Before the generation of the concept of an international trading system, most countries had their own trade regulations imposing tariffs, quotas, subsidies, barriers, dumping, safeguards, and strategic and countervailing trade practices (Balaam, 127-128). As a consequence, this led to many problems concerning the transportation and costs of many imported and exported products. By the end of World War II, the United States and its close allies produced the idea of having an international trade organization as a mean to spread values of liberal trade with the objective to follow with U.S. military strategies and political agendas (Balaam, 118).

As a result of that ideology was the introduction of the International Trade Organization (ITO), however, the United States was unable to complete the agreement leading to the General Agreement on Tariffs and Trade (GATT). Under the GATT, participating countries were able to trade with the elimination of tariffs and barriers for the development of their countries. The agreement's purpose was to liberalize trade through multilateral consensus on the reduction of protectionist barriers; this was a way to prevent countries from working on unilateral agreements and remove discrimination for the importation of products (Balaam, 123).

Since there were problems with the GATT, members of the agreement search for a new form of international trade developing the World Trade Organization (WTO). The GATT was considered inappropriate for the following reasons: first, it was a provisional agreement, secondly, its ruling was limited and the development of the organization was breaking legal status, it needed to be authoritative and impartial concerning issues of international trade (Pease, 159). On January 1st, 2005, the World Trade Organization opened its doors to the 132 members upholding pervious GATT agreements with the expansion of agriculture, intellectual property rights, and services (World). Now the WTO has the ability to authorize sanctions and review state policies regarding trade. Under its operation, the WTO has the authority to resolve conflicts dealing with Non-tariffs barriers (NTBs) and tries to maintain a balance of state interests and the interest of free trade, such that both can be taken into account and no one has dominance over the other (Pease, 160). 

One of the negative reasons in general for the World Trade Organization is the sentiment that the organization intensifies the differences between the rich and poor countries, saying that the rich countries have enough power to stay on top because they make the rules to favor them (Pease, 163). This dispute has been risen by member states, one, in particular, being Japan stating that "The European Union and the United States are utilizing the dispute settlement regulations in matters that suit them and not by the rules of anybody else" (Pease, 170). The United States and the European Union are allowed to get away with the rules imposed by the WTO because of their large economies. Since both economies depend on each other heavily either country can use the practice of the carrot stick in order for the other to comply. However, that is a major disadvantage for the lower economies because they lack having enforcement of such rules making larger economies comply. A Japanese led group has been trying to reform this since 2000, but the European Union and the United States refuse such reforms.

The World Trade Organization, according to the United Nations (UN) leads to the disparity of wealth and other forms of social and economic inequities leading to conflict and instability between rich and poor countries (Pease, 170). In its report, the UN stated: "the organization was a nightmare for developing countries and should be brought under the jurisdiction of the UN since the rules were unfair and leading towards an agenda reflected to serve and promote the dominant corporate interest" (Pease, 169).

As for the participation of United States and the European Union (Communities) in the WTO leads to the predicament of Lenin stating: "In the period of modern imperialism, capitalist countries used to trade to expand capitalism into under develop countries and use the power of finance as much as the power of military conquests to generate empires of exploitation and dependency"(Balaam, 122). Although they might want to generate the idea that they want to liberalize the economies of the third world so they can prosper and resolved their internal conflicts, it much produces the opposite effects. 

In conclusion, the United States as a member of this institution poses a threat to developing countries and their economies. It, as well as the European Union, use their influential power to benefit themselves giving other countries the opportunity of becoming dependent and subject to exploitation. Member countries join the WTO for the ability to trade with the U.S and the E.U. because of their large economies and the ability to export large amounts of goods towards those markets. However, indirectly, small and less develop countries are being exploited and the conditions of living worsen through these unfair free trade agreements. 

Works Cited

  • Balaam, David N. and Veseth, Michael "International Trade"; Introduction To _ International _ Political Economy: Third Edition. New Jersey, Prentice Hall, 2005: 119-132
  • Pease, Kelly-Kate S. "Trade" International Organizations: Perspectives on Governance _ in the _ Twenty-First Century. Second Edition. New Jersey: Prentice Hall, 2003: 155-169
  • World Trade Organization (WTO): "Information about the World Trade Organization";30, November 2006.

     


     

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