WTO - World Trade Organisation

What is WTO?

The World Trade Organisation or the WTO is the only such global international entity that deals with the rules and regulations related to international trade between different countries. Such regulations and obligations only cover countries which hold the membership to the World Trade Organisation. The functioning of the WTO is based on negotiated and signed WTO agreements between member countries. It has to be kept in mind that the WTO agreements will have to be ratified by the parliaments of the member countries. 


In Which Year Was WTO Established? 

The World Trade Organisation was established on January 1, 1995, following the Marrakesh Agreement which was ratified on April 15, 1994. The General Agreement on Tariff and Trade was substituted by the Marrakesh Agreement. 


Do You Know?

The income in the annual budget of the World Trade Organisation is accumulated from the contribution made by member countries. The formula for the contribution is consistent with the volume of international trade of each member country. India has already an advance payment to the tune of Rs.33 crores as its due contribution to the WTO for the year 2020.


Objectives of WTO 

The six key objectives of World Trade Organisation have been discussed below. 

  1. Establishing and Enforcing Rules for International Trade 

The international trading rules by the World Trade Organisation are established under three separate agreements – rules relating to the international trade in goods; the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the General Agreement on Trade in Services (GATS). 


The enforcement of rules by the WTO takes place by way of a multilateral system of disputes settlement in the instances of violation of trade rules by member countries. The members are obligated under ratified agreements to honour and abide by the procedures and judgments. 


  1. Acting As A Global Apex Forum 

World Trade organisation is the global forum for monitoring and negotiating further trade liberalisation. The premise of trade liberalisation measures undertaken by WTO is based on the benefits of member countries to optimally utilise the position of comparative advantage due to free and fair trade regime.


  1. Resolution Of Trade Disputes 

Trade disputes, before the WTO, usually arise out of deviation from agreements between member countries. The resolution of such trade disputes does not take place unilaterally but through a multilateral system involving set rules and procedures before the dispute settlement body. 


  1. Increasing Transparency in The Decision-Making Process

The World Trade Organisation attempts to increase transparency in the decision-making process by way of more participation in the decision-making and consensus rule, in particular. The combined effect of such measures helps to develop institutional transparency.


  1. Collaboration Between International Economic Institutions 

The global economic institutions include the World Trade Organisation, the International Monetary Fund, the United Nations Conference on Trade and Development, and the World Bank. 


With the advent of globalisation, close cooperation has become necessary between multilateral institutions. These institutions are functional in the sector of formulation and implementation of a global economic policy framework. In the absence of regular consultation and mutual cooperation, policymaking may be disrupted.


  1. Safeguarding The Trading Interest of Developing Countries

Stringent regulations are implemented by the WTO to protect the trading interests of developing countries. It supports such member countries to leverage the capacity for carrying out the mandates of the organisation, managing disputes, and implementing relevant technical standards. 


Features of WTO 

The major features of the World Trade Organisation are –

  • The scope of WTO is far more expansive than the erstwhile General Agreement on Trade and Tariff. For instance, GATT solely focused on goods while excluding textiles and agriculture. On the other hand, WTO covers all goods, services and investment policies along with intellectual property.  

  • WTO Secretariat has formalised and bolstered the mechanisms for the review of policies as well as the settlement of disputes. This aspect has become crucial due to proliferation of member countries and more number of goods and services being covered by the WTO. Another important consideration in this regard is the substantial increase in open access to different international markets.

  • There are rules implemented for the protection of small and weak countries against the discriminatory trade practices of developed countries. 

  • National Treatment articles and Most Favoured Nation (MFN) clause permits equal access to markets for just treatment of both domestic and foreign suppliers.

  • Each member country of the WTO carries single voting right and all members enjoy privilege on the global scale.

  • The WTO agreements encompass all the member states and acts as a common forum of deliberation for the members. 


Roles and Functions of WTO 

The broad reach of WTO and its functions have been mentioned below. 

  • Implementation of Rules for Review of Trade Policy 

The international rules of trade provide stability and assurance and lead to a general consensus among member countries. The policies are reviewed to ensure that even with the ever-changing trading scenarios, the multilateral trading system thrives. It also helps in the facilitation of a transparent and stable framework for conducting business.

  • Forum for Member Countries Discuss Future Strategies 

The WTO, as a forum, allows for trade negotiations in the multilateral trading system. In the absence of trade negotiations, growth may stunt, and issues related to tariff and dumping may go unaddressed. Further liberalisation of trade is also subject to consistent trade negotiations. 

  • Implementing and Administering Bilateral and Multilateral Trade Agreements 

The bilateral or multilateral trade agreements have to be necessarily ratified by the parliaments of respective member countries. Unless such ratification comes through, the non-discriminatory trading system cannot be put into practice. The executed agreements will ensure that every member is guaranteed to be treated fairly in other members’ markets. 

  • Trade Dispute Settlement 

The dispute settlement by the WTO is concerned with the resolution of trade disputes. Independent experts of the tribunal interpret the agreements and give out judgment mentioning the due commitments of the concerned member states. It is encouraged to settle the disputes by way of consultation among the members as well. 

  • Optimal Utilisation of the World's Resources

Resources across the world can be further optimally utilised by harnessing the trade capacities of the developing economies. It requires special provisions in the WTO agreements for the least-developed economies. Such measures may include providing greater trading opportunities, longer duration to implement commitments, and also support to build the sue infrastructure. 


Test Your Knowledge –

  1.  Where is the headquarter of World Trade Organisation located?

(a) Melbourne 

(b) New York 

(c) Doha 

(d) Geneva


  1. How many countries are members of the World Trade Organisation?

(a) 164 member countries 

(b) 160 member countries 

(c) 144 member countries 

(d) 194 member countries 


      3. Which of the following is the official language of the World Trade Organisation?

(a) Spanish 

(b) French 

(c) English

(d) All of the above

 

   4. Who among the following is the current director-general of the World Trade Organisation?

(a) Roberto Azevedo 

(b) Antonio Guterres 

(c) Peter Sutherland 

(d) Kristalina Georgieva 


[Refer to the solution to the questions at the end of the article]

To learn about the topic in detail, you can refer to various online materials on our websiteVedantu app in your device!

FAQ (Frequently Asked Questions)

1. When Was WTO Established?

The World Trade Organisation was officially commenced from January 1, 1995, pursuant to the Marrakesh Agreement which was ratified on April 15, 1994. The Marrakesh Agreement had replaced the erstwhile General Agreement on Tariff and Trade (GATT). The member governments run the World Trade Organisation, and major decisions are undertaken by the membership as a whole.

2. What Is The Aim of WTO?

World Trade Organisation aims the facilitation of international trade, and to ensure that it does not become skewed for or against a country. Such an aim is manifested in various objectives. It helps in setting and enforcing the regulations for international trade and also engages in the resolution of trade disputes.

The WTO acts as a forum to monitor and negotiate further trade liberalisation. The measures help in the cooperation between major international economic entities and help in increasing transparency in the decision-making process.

3. Write A Short Note on WTO.

The World Trade Organisation (WTO) as a successor to the General Agreement on Trade and Tariff, was founded on January 1, 1995. The WTO presently has 164 member countries with the last to join was Afghanistan. The member countries to the WTO are obligated to abide by the policies and regulations that are framed under relevant rules. 


The major functions of the World Trade Organisation include facilitation of international trade by way of removal of both non-tariff and tariff barriers which allows higher market penetration by the member countries. The rules formulation is consistent with the trading regime and cannot implement any such regulation that would amount to imposing arbitrary trade restriction. The interest of developing countries is also protected along with the optimal utilisation of resources across the world.