The which established a significant body of trading rules

The WTO (World Trade Organisation) came into existence on 1 January 1995.This ‘new’ trading organisation was quite similar to the ‘old’ General Agreement on Tariffs and Trade(GATT) body, which has governed the world trade since 1940s. The WTO encompasses half a century of multilateral trade negotiations in the GATT, which established a significant body of trading rules and liberated the trade. However, WTO applies to a larger share of global commerce than its predecessor. The WTO has been seen a critical foundation for a new kind of global economic order, that was very open, inclusive and cooperative. Nations that were largely shut to the world economy for almost half a century had turned to open markets and economic integration. Developing nations that were left behind for decades became more industrialized and were beginning to catch up with rapid economic changes. ”If the GATT was a product of a divided world, the WTO offered the promise of a more unified one”. 1

 

Since the WTO commenced, the world has seen a rapid growth in international economic activities, as well as a huge increase in the international trade. In recent times the WTO has become one of the most important international organizations 2.

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Almost 150 nations, developed and developing, powerful and weaker, have now become members of the organisation. The organisation is run by its member governments. Member nations as a whole, either ministers (who meet at least once every two years) or by ambassadors or delegates (who meet regularly in Geneva), takes all the major decisions.

The WTO differs from some other international organisations such as the World Bank and International Monetary Fund. In a way that in this multilateral trading organisation, power is not delegated to a board of directors or the head of the organisation. All the decisions are made by the consenting member nations. The rules imposed by WTO on countries’ policies are always the outcome of negotiations among member nations. The member nations make sure that the rules & decisions are enforced enforced under agreed procedures that they negotiated, including the possibility of trade sanctions. These sanctions are imposed by member nations, and authorized by the membership as a whole entity.

The main objective of the WTO remains to be the liberalization of international trade. The instruments chosen under the WTO system to achieve the further liberalization of trade are:

1. the MFN Principle;

2. national treatment;

3. reciprocity; and?

4. fair competition.3

The aim of these key pillars of the WTO is to ensure a level playing field, so that it can enable trade actors to compete on an equal level, with the notion of fair play in accordance to the WTO agreements.

Reaching a collective decision among about 150 members can be a difficult task at times. Despite this difficulty, some remarkable agreements have been made by WTO. The new dispute settlement system of the WTO has received over 300 trade disputes from its member nation and it has given its rulings in more than 80 of such cases. That has provided a greater stability and predictability in global trade environment. On the basis of that the organisation has such a short history, it is tempting to claim that the WTO has been a success. 4

However, it is necessary to go deeper into the workings of this organization within the past 22 years before reaching the conclusion that this is so.

1.     The achievements of WTO

 

1.1  Legal certainty through a rule-based system

One of the major accomplishment of the WTO has been to provide legal certainty to producers and exporters so that the overseas markets remain accessible to them. This certainty has been achieved by establishing a rule-based, holistic international organisation and an effective dispute settlement system. Many of the agreements by WTO provide the ground rules for the conduct of international trade and commerce among nations and public across the globe. In order to provide integrity to this rule-based system the world organisation had to strengthened the dispute settlement mechanisms, so that the chances of these disputes flowing into military or political conflict is reduced.

As per the WTO agreement its members follow a non-discriminatory trading system based on its key instruments, such as the most-favoured nation treatment and fair treatment, that carries their rights and obligations. In other words, each member nation is guaranteed that its exports will be treated fairly and consistently in other nation’s markets and vice versa.

1.2  Liberalization of trade in services

The Uruguay Round negotiations broadened the scope of the WTO by incorporating the liberalization of trade in services as a component of the international trade agenda. As per the General Agreement on Trade in Services (GATS), banks, telecommunications companies, tour operators, hotel chains, insurance firms and transport companies looking for business opportunities in foreign nations can now benefit from the same principles of a much freer and fairer trade that was initially applied only to trade in goods. Due to the efforts made by the world trade organisation, new agreements have achieved liberalisation of  the telecommunications sector, including several components of financial services.5