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This article provides information about the evaluation of the functions of WTO (World Trade Organisation):
Simply, WTO is an organisation that deals with rules of trade between notions at a global or near global level. It has emerged out of negotiations among the member countries on trade issues. Indeed it is a place where the members states go to try enhance the trade prospects and to sort out the trade problems they face with each other.
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It functions for negotiating trade agreements among the member governments. Through negotiations, the WTO helps member countries to remove and lower trade barriers and liberalise trade. It is imperative, here to examine the function of WTO.
Functions:
The WTO sets rules for trade among nations. The WTO agreements, which emerge out of several rounds of negotiations, provide the legal ground-rules for international commence.
They are essentially contracts, binding governments to keep their trade policies within agreed limits. Although negotiated and signed by governments, the goal is to help producers of goods and services, exporters and importers conduct their business, while allowing governments to meet social and environmental objectives. WTO also helps settle disputes related to trade.
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Most of the agreements, in the WTO system, often need interpretation. At times differences take place among the trading partners on the interpretation of the agreements. There are also conflicts in trade interests. “The most harmonious way to settle these differences is through some neutral procedure based on the agreed legal foundation.” WTO aims to settle all disputes with laid down procedure.
Principles of the Trading System: As WTO sets the rules for trade; it has developed sets of agreed principles for this purpose. Indeed WTO agreements are based on certain fundamental principles. These may be described as follows:
i. Trade without Discrimination:
This principle has two aspects to it (i) Most Favoured Nation-MNF: Under WTO agreements no country can normally discriminate among its trading partners. When some special favours are given, e.g., the Most Favoured Nation (MFN) treatment, the same favour is normally to be thrown to all the other WTO members. Even though it sounds like a contradiction, in essence it implies that each member treats all the other members as Most Favoured trading partners, (ii) National Treatment.
This involves imported and locally- produced goods should be treated equally — at least after the foreign goods have entered the market. The same should apply to foreign and domestic services and to foreign and local trademarks, copyrights and patents” To WTO, “opening markets can be beneficial, but it also requires adjustment. The WTO agreements allow countries to introduce changes gradually through progressive liberalisation. Developing countries are usually given a longer turn to fulfil their obligation”. Significantly the WTO agreement also desires the member governments to ensure that the business environment is stable and predictable.
ii. Open Trade Policy and Fair Competition:
WTO recognises that “all countries, including the poorest, have assets – human, industrial, natural, financial – which can be used for producing goods and services both for the domestic and overseas markets. It also recognises that bilateral trade policies, that allow the unrestricted flow of goods and services, sharpen competition, motivate innovation and breed success. They multiply the rewards that result from producing the best products with the best design at the best price”. The WTO believes that lowering trade barriers such as import duties or tariff, restricting or removing quotas and removing bans on select imports goes a long way in encouraging free trade.
iii. Encouraging Economic Reforms:
Trade liberalisation is an important agenda of WTO. Over three quarters of WTO members are developing countries and countries in transition to market economies. Here all members have committed themselves to market access within a specified timeframe.
iv. General Agreement on Trade in Services (GATS):
Earlier agreements tended to concentrate on goods but increasingly the areas expanded to services such as banking, telecommunications, postal services, tourism, transportation, waste disposal, oil and gas production and electricity. They also cover those services universally considered to be essential to human health and development, like healthcare, education and drinking water. GATS was established in 1994 as part of the Uruguay Round.
It is known as a “bottom-up” agreement because it is based on countries listing the sectors they will open up for liberalisation. GATS negotiators and the WTO like to project GATS as a very flexible agreement from which countries may completely exclude certain sectors. “Unfortunately, in reality, the GATS text is very ambiguous in terms of what is covered by its rules and what is not.
For instance, the first paragraph in the GATS states that only government services that are supplied neither on a commercial basis nor in competition with one or more service suppliers are excluded from GATS on the basis of being a government service. Most government services (like healthcare, education and energy) involve some public/ private mix and might therefore be subjected to GATS rules. Such government services could be challenged for violating WTO rules.”
Scope:
The WTO agreements cover goods, services and intellectual properly. The Uruguay Round of Multilateral Trade Agreement, that form the foundation of WTO, covers the following three broad areas of trade agreements:
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i. It includes (a) General Agreement on Tariffs and Trade (GATT)
ii. The General Agreement on Trade in Services (GATS) and
iii. The trade related aspects of intellectual property rights.